Key facts
- The SEC clarified that certain data center securitizations do not qualify as asset-backed securities.
- The clarification was issued in response to a request from Latham & Watkins.
- This change simplifies the issuance process and lowers compliance costs for data center operators.
- The AI boom is increasing demand for capital to expand data center infrastructure.
The U.S. Securities and Exchange Commission (SEC) has issued guidance clarifying that certain data center securitizations are not considered asset-backed securities. This decision, prompted by a request from the law firm Latham & Watkins, aims to streamline the process and reduce costs for data center operators seeking to raise capital through debt issuance.
Asset-backed securities are typically created by pooling financial assets that generate regular cash flows, which are then sold to investors. The SEC's clarification means that securitizations where the issuing entity directly owns the data center and securities are repaid from net operating income will face fewer regulatory hurdles. This is particularly relevant as the demand for AI computing power drives significant expansion in data center infrastructure.
Historically, companies like Sabey, Compass, CyrusOne, and STACK Infrastructure have utilized securitization markets. However, regulatory ambiguity created friction and increased compliance costs. The new guidance effectively removes these burdens for qualifying structures, potentially leading to lower legal costs and faster execution. Data center ABS and commercial mortgage-backed securities issuance exceeded $25 billion in 2025, and this regulatory clarity is expected to support continued growth in this financing channel.