Liberty secures 0% CB funding to power AI pivot
Liberty Energy raised an upsized US$700m late on Tuesday from the sale of a five-year convertible bond priced at a zero-percent coupon that helps fund its pivot from oilfield services to power provider for AI data centres.
Goldman Sachs, JP Morgan, Bank of America and Wells Fargo increased the base deal size late in the one-day bookbuild to US$700m and tightened talk to 0%–0.25%, up 32.5%–35%, from the US$500m at launch and initial talk of 0.25%–0.75% and 27.5%–32.5%.
They priced the CB at zero percent, up 32.5%.
The banks had guided accounts towards a credit spread and implied vol of SOFR+300bp and 48, highlighting what is a stable but suddenly volatile business.
A week after hitting a US$27.21 all-time high on the release of bullish fourth-quarter results and outlook, Liberty shares fell just 0.1% over the CB marketing period to US$26.04.
“This is a company that continues to generate solid cashflow despite depressed oil prices,” said one hedge fund manager who put in for the deal. “They realised that their large equipment used to flood oil wells could be customised to provide power for AI data centres.”
Liberty used the proceeds to fully repay US$437m drawn on a revolving credit facility on which it pays 6.6% annually. To achieve similar fixed-income economics, the company spent US$99.4m on a capped call to offset dilution from the CB up to a share price of US$65.10, a 150% premium to reference.
Liberty is coming off a strong fourth quarter that saw it pump out US$158m of adjusted Ebitda while growing revenue by 6.3% to US$1.04bn, thrashing the US$106m and US$880m analyst consensus.
The company also announced plans to triple AI power centre deployments to 3GW of power capacity by 2029, from 1GW by 2027 previously, on agreements with data centre developers.
“A large percentage of the assets that we will deploy ... will be in the data centre space,” Liberty CEO Ron Gusek said on the quarterly earnings call.
“That is a reversal of my comments on this call last year, where I said I thought we’d probably be primarily (be focused on commercial and industrial) opportunities, with maybe some oilfield electrification.”
Liberty has a small stake in small modular nuclear power provider Oklo, providing additional optionality to alternative power generation.
The shift from traditional to new-age AI power is a familiar theme to investors. In October, Solar Edge Infrastructure pitched a similar transition in raising an upsized US$747.5m from the sale of a 0.25% CB due 2031.