The most disciplined treatment of neocloud credit I have read anywhere — and "a lease is only as long as the tenant's solvency" should hang in underwriting rooms. The oldest case on this shape of risk opened on September 18, 1873, when Jay Cooke & Co. shut its doors: the financing house of the Northern Pacific had written its obligations against bonds not yet sold, short obligations carrying a transcontinental build, and when the market would no longer roll them the exchange closed for ten days — the first closure in its history. The track survived its bankers; it changed hands in receivership, at prices that made the next owners' fortunes. Your twelve-to-eighteen-month backfill window is where that history will concentrate this time. The capital that prices tenant credit for the full fifteen years is the capital standing at the trustee's table when the neocloud leases break. Who is reserving for that table now?
It feels a bit like the WeWork model of long term obligation versus short term cancelable revenue. Additionally, though, the value of the office space probably depreciate slower than the GPUs being rented out.
The most disciplined treatment of neocloud credit I have read anywhere — and "a lease is only as long as the tenant's solvency" should hang in underwriting rooms. The oldest case on this shape of risk opened on September 18, 1873, when Jay Cooke & Co. shut its doors: the financing house of the Northern Pacific had written its obligations against bonds not yet sold, short obligations carrying a transcontinental build, and when the market would no longer roll them the exchange closed for ten days — the first closure in its history. The track survived its bankers; it changed hands in receivership, at prices that made the next owners' fortunes. Your twelve-to-eighteen-month backfill window is where that history will concentrate this time. The capital that prices tenant credit for the full fifteen years is the capital standing at the trustee's table when the neocloud leases break. Who is reserving for that table now?
It feels a bit like the WeWork model of long term obligation versus short term cancelable revenue. Additionally, though, the value of the office space probably depreciate slower than the GPUs being rented out.
The key point here is the type of tenant makes a big difference in the credit risk.