Meta borrows $15 billion for artificial intelligence

Meta, the umbrella company of Facebook, Instagram and WhatsApp, is preparing for a new Meta bond issuance. Accordingly, the company announced in the notification submitted to the US Securities and Exchange Commission (SEC) that it will borrow $15 billion for artificial intelligence investments. Additionally, the money will be raised by selling bonds to investors in the United States.

Bond simply means a debt instrument. Because when the investor buys a bond, he lends money to Meta. The company also pays interest according to the determined schedule. Then, it returns the principal at the end of maturity.

Meta bond issuance consists of five groups

According to Bloomberg, the sale consists of five groups of bonds with maturities ranging from 5 to 30 years. Therefore, Meta will not have to pay the entire debt on the same date. On the other hand, payments will be spread over different years.

Maturity describes the period over which the debt will be repaid. For example, the 5-year group will close early. On the other hand, the payment of the 30-year group will come much later.

The company is also expected to sell bonds denominated in euros. Moreover, it is stated that the total financing provided through the two transactions will reach at least 20 billion dollars. Therefore, the $15 billion portion represents only a fraction of the total funding.

There is a high cost behind borrowing

The reason for this step is that growing artificial intelligence infrastructure is expensive. In fact, Meta forecasts capital expenditures of $135 billion to $145 billion this year. Capital expenditure refers to the company's expenses for long-term investments.

Most of the spending comes from artificial intelligence investments. The money needed for data centers and computing capacity is driving technology companies to new sources of financing. Meta had also tried this method before.

For example, the company sold bonds worth $25 billion in April and $30 billion last year. Therefore, the new Meta bond issuance means that the company returns to a financing method it has used before.

Share sale plan also expanded

Meta also expanded a share sale plan that could reach $97.5 billion. But the difference is important. Because in a bond, the company borrows money from the investor. It provides financing by giving shares in share sales.

On the other hand, Moody's, which gave the new bonds an Aa3 credit rating, expects Meta's cash assets to remain above its debts despite increasing expenses. Credit score means a rating that shows a debtor's ability to pay his debt. The company's euro-denominated bond sale and total financing reaching at least 20 billion dollars are seen as the next step.