NEXTDC Seeks A$1.1B in Convertible Notes to Fund Australian AI Data Center Expansion

Australian data center operator NEXTDC is turning to the convertible bond market to raise A$1.1 billion ($795.6 million), as the Brisbane-headquartered company accelerates spending on infrastructure designed to support artificial intelligence and cloud workloads across its home market.

In a September 9 filing with the Australian Securities Exchange, NEXTDC said the proceeds would primarily fund its Australian data center development pipeline, with the remainder covering capped-call and transaction costs and any balance reserved for general corporate purposes. The proposed subordinated, unsecured notes are due on September 17, 2031, and would give holders a put option in September 2029. NEXTDC is marketing an indicative annual coupon of 1.25 percent to 1.75 percent, while the initial conversion price is expected to be set at a 32.5 percent to 37.5 percent premium to a reference share price.

That reference price will be established through a concurrent delta placement of existing NEXTDC shares and will not be lower than A$12.40 per share. The placement is designed to let investors hedge their exposure while the notes are marketed. Pricing remains subject to the bookbuild, so the final coupon and conversion price may differ within the indicated ranges. NEXTDC also plans capped-call transactions with an indicative cap set 70 percent above the reference share price. Such transactions can reduce the dilution that would otherwise occur if noteholders convert, although they do not remove the company's repayment obligations or other financing risks.

Reuters reported that NEXTDC shares closed 2.2 percent higher at A$12.79 on September 9, and described the transaction as the company's third fundraising initiative in just over four months. The latest financing comes as NEXTDC guides to fiscal 2027 capital expenditure of A$5.25 billion to A$5.75 billion, roughly 55 percent to 70 percent above its fiscal 2026 spending, reflecting the cost of building and fitting out high-density capacity before customer demand turns into revenue.

The company expects the proposed offering to lift its pro forma liquidity to about A$9.8 billion as of June 30, 2026, based on the full A$1.1 billion transaction, though that figure remains sensitive to final pricing, transaction costs and completion. NEXTDC has already expanded its funding mix this year. In May, the company said it had secured A$1.8 billion in new senior debt commitments, taking pro forma liquidity at that point to about A$8.4 billion. It also cited an A$1.5 billion entitlement offer, A$750 million of subordinated wholesale notes and commitments supporting its hybrid-securities program.

In an official May update, NEXTDC said its contracted utilization had risen by 250 megawatts to 667 MW, while its forward order book reached 544 MW. The company linked the funding program to developments including its S4 campus in Sydney and M4 campus in Melbourne, alongside expansions elsewhere in Australia. Although NEXTDC has been expanding across the Asia-Pacific region, the new note proceeds are earmarked mainly for its domestic pipeline. The company opened its first international data center, KL1 in Kuala Lumpur, in May and continues to assess projects in other regional markets.

The financing announcement does not allocate the A$1.1 billion to individual facilities or disclose how much capacity it will directly fund. Delivery will also depend on access to land, grid connections, power and water, which are increasingly important constraints for Australian data center developers. The proposed notes add another layer to NEXTDC's capital structure while delaying potential equity dilution unless its shares rise sufficiently for conversion. Final terms, the transaction timetable and completion of the capped-call arrangements remain subject to the offering process.