Australia's NEXTDC to Raise $795 Million in Convertible Notes for AI Data Center Expansion

Australian data centre operator NEXTDC has launched a A$1.1 billion ($795.63 million) convertible notes offering, marking its third fundraising effort in just over four months as the company accelerates investment in AI-driven infrastructure. The Queensland-headquartered firm is seeking to capitalize on surging demand for artificial intelligence computing capacity while managing the financial burden of an ambitious expansion pipeline.

The notes are scheduled to mature on September 17, 2031, and will carry a holder put option exercisable in September 2029. The initial conversion price will be set at a premium of 32.5% to 37.5% above the reference share price. NEXTDC also intends to enter capped call transactions with an indicative cap price 70% above the reference share price, a structure designed to reduce potential dilution for existing shareholders. The reference share price will be determined through a concurrent delta placement of existing shares, allowing investors to hedge their exposure, and will not be less than A$12.40 per share.

Proceeds from the offering will fund the ongoing expansion of NEXTDC's local data centre pipeline, the cost of the capped call transactions and associated fees, with the remainder allocated for general corporate purposes. The company expects fiscal 2027 capital expenditure of between A$5.25 billion and A$5.75 billion, representing an increase of approximately 55% to 70% over fiscal 2026 spending, as it ramps up investment to meet AI-driven demand.

Hersh Oberoi, global research director at Balfour Capital, noted that the convertible structure should prove less dilutive than a straight equity raising, allowing NEXTDC to secure necessary funding while postponing dilution unless the shares rise sufficiently to trigger conversion. Oberoi added that the deal underscores the scale of the company's funding requirements, with contracted AI-driven capacity growth demanding substantial investment before it generates revenue.

The capital raising comes amid growing constraints on power and water access facing Australian data centre developers, which threaten to slow a nationwide data centre expansion. NEXTDC shares ended 2.2% higher at A$12.79 on Wednesday.