This week, Blue Owl announced the acquisition of IPI Partners for approximately $1 billion, marking a significant step into the digital infrastructure space.

Ana Arsov, Global Head of Private Credit at Moody’s Ratings, commented: “Blue Owl’s acquisition of data center fund manager IPI Partners highlights the key role that private credit is poised to play in meeting global investment needs in new data center capacity that is expected to exceed $2 trillion over the next five years.

“This deal is emblematic of a broader trend heralding a new wave of financing poised to support the coming expansion of data center capacity.”

As digital infrastructure continues to evolve, demand for new data centers has skyrocketed, driven by increased data production, widespread adoption of cloud computing, and the growing need for AI technologies.

In a recent report, Moody's analysts highlighted the urgent need for capital in the data center sector, highlighting the crucial role that private credit markets will play in restructuring the industry's financial ecosystem.

"Blue Owl's purchase of IPI provides on-the-spot insight into where and how they can deploy significant amounts of new capital to build new data centers at a time when demand for new data center capacity is significantly outstripping available supply," said John Medina, Moody's Ratings Senior Vice President of Project and Infrastructure Finance.

The Moody's report highlights that global investment in new data center capacity is expected to total around US$2.2 trillion, averaging around US$443 billion annually from 2024 to 2028.

So far this year, nine US data center ABS transactions totaling US$4.7 billion have hit the private credit markets, following 14 deals worth US$6.2 billion in 2023. In addition, the first two European data center ABS transactions sponsored by Switch reached financial close in 2024, indicating an increasing trend in overseas markets.

Moody's also highlighted that the data center sector is poised for a refinancing boom, which is expected to ensure a continued need for private credit.

Specifically, the rating agency expects a surge in refinancing as new facilities come into operation and start generating lease payments, improving the credit profile of their initial investments.

"As banks and equity investors seek to refinance construction loans or seed investments, developers and sponsors will diversify their financing strategies using corporate credit, leveraged loans, bank facilities, CMBS, ABS, private credit and equity financing markets. projects", said Arsov.