Microsoft-backed financing secures $3.65B GPU loan

IREN closed a $3.65 billion financing facility on June 1 to purchase graphics processing units for a five-year Microsoft AI cloud contract. The loan is secured by the GPUs and Microsoft’s scheduled contract payments. Fitch assigned the facility an A rating and the transaction carries a blended interest cost of 6.00%.

Goldman Sachs and J.P. Morgan arranged the financing. Microsoft provided a $1.94 billion prepayment, and together the loan and the prepayment covered about 96% of IREN’s $5.81 billion GPU capital expenditure tied to the $9.7 billion contract over five years.

IREN’s management described the financing as effectively acquiring the hardware at very low net cost and reported an all-in funding metric of 3.31%, while the stated borrowing cost on the facility is 6.00%.

Credit agencies rated the facility on the basis of Microsoft’s payment obligations rather than IREN’s standalone credit profile. DBRS assigned an A (low) rating. Because the loan is secured by the GPUs and the cash flows Microsoft committed to, lenders and rating firms treated Microsoft’s payment promise as the principal credit driver, with IREN’s claims in a subordinated position.

The rating sits one notch below Microsoft’s AAA and reflects assumptions about rapid hardware depreciation and execution risk. Rating statements noted typical GPU useful lives of three to five years and the potential for hardware value decline over the financing term.

Investment-grade status gives the facility access to pools of long-duration capital, including insurers and pension funds that generally restrict holdings to rated investment-grade debt. Transactions that fail to reach investment grade typically turn to private-credit funds or high-yield lenders that charge higher spreads.

Earlier this year, a separate GPU-backed financing of about $8.5 billion completed at a near-investment-grade level and priced at a similar spread. Both transactions priced at roughly the same spread-around SOFR plus 2.13%—with an investment-grade anchor customer cited as a key factor in pricing.

The lenders hold first claim on the GPUs and Microsoft’s contract payments. If the contract underperforms, recoveries for equity holders would be subordinate to secured creditors. IREN management said the combination of the debt facility and Microsoft’s prepayment allowed the company to fund nearly all GPU purchases without issuing new shares, increasing leverage tied to the single large contract.

Market participants will monitor whether contracted compute demand and the operating life of the hardware align with the financing timeline. Competing firms seeking similar financing support include companies pursuing partnerships with large cloud customers to attach investment-grade customer credit to their capital plans.