TD Bank mulls hedging data centre debt with rare SRT deal
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A Toronto-Dominion (TD) bank branch in Washington, on Oct. 10, 2024. Photo by Stefani Reynolds/BloombergArticle contentToronto-Dominion Bank is weighing a rare type of significant risk transfer to hedge current and future data centre exposure as tech companies ramp up artificial intelligence investment.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThe initial size of the reference portfolio is around US$1 billion, according to people familiar with the matter. The potential transaction would include a forward-flow arrangement, which allows the bank to increase the size of the SRT over time, said the people, who asked not to be identified because the matter is private.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.We apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Play VideoArticle contentArticle contentThe bank would be able to include data center debt it originates over a set period, rather than in a one-off transaction. The tentative deal is at an early stage and its terms may change significantly during the issuance process, the people said.Article contentPosthasteBreaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentToronto-Dominion Bank joins lenders such as Societe Generale SA and Morgan Stanley in exploring risk transfers to hedge data center financing, as AI infrastructure investment gathers pace. Four of the biggest U.S. technology companies have earmarked about US$650 billion of capital spending this year for new data centres and related equipment.Article contentA representative for the Toronto-Dominion Bank declined to comment.Article contentBanks use SRTs to manage risk or free up capital, giving them more room for new lending, acquisitions or shareholder payouts. They act as insurance against default, and typically cover between five per cent and 15 per cent of the value of a loan or portfolio of loans.Article contentCanadian banks, including Bank of Montreal, have been selling SRTs as a way to increase their capital cushion.Article contentWith assistance from Neil Callanan.Article contentBloomberg.comArticle contentTrending An old factory in Welland, Ont., sat derelict for years — until someone discovered it could be worth billions Mining Canadian telecom Rogers goes into tailspin as price war heats up Telecom Should Caroline, 62, defer CPP and OAS until age 70, or even delay retirement entirely?
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Personal Finance Toronto's condo market 'hits bottom' with some developers looking at selling units below cost Real Estate Canada wants reciprocity in trade talks after U.S. ‘pocketed’ concessions Economy