Equinix announces SGD 5-year green bonds at an IPG of 3.75%

Equinix, Inc. (Equinix) is a global digital infrastructure company focusing on data centres and interconnection services (i.e. connecting businesses to customers or other cloud providers). As of December 2024, it operated 268 data centres in 35 countries with over 10,000 customers, including about 482,200 interconnections. It functions as a REIT in the US – the company generally provides the infrastructure required (e.g., leasing the land and power infrastructure) for said data centres and interconnections.

Equinix Asia Financing Corporation Pte. Ltd., a wholly-owned subsidiary of Equinix and its financing vehicle, plans to issue new SGD 5-year green bonds at an initial price guidance (IPG) of 3.75% for accredited and institutional investors only. The bonds will be guaranteed by its parent Equinix and are expected to be rated BBB+ by Fitch, while Equinix is rated BBB (Stable) by S&P, Baa2 (Stable) by Moody’s, and BBB+ by Fitch. Proceeds will be used to finance or refinance (in whole or in part) Eligible Green Projects.

Financial highlights

(Data are as of FY24 [31 December 2024] in USD terms; growth rates are YoY unless otherwise stated.)

Equinix’s revenues grew by +7% to $8.7b in FY24, marking a 22nd consecutive year of top-line revenue growth. The company also saw positive revenue growth in its three main geographies (Americas: 7% / EMEA: 5% / APAC: 11%), as the company delivered record megawatts sold (i.e. indicator of volume). It is also worth noting that recurring revenues are a big part of its total revenues, with an >90% share over the past three years.

Cost of sales (+6%) and other operating expenses (+17%), however, increased in tandem with revenues. These arose from multiple factors, including (i) higher depreciation expenses and (ii) higher sales and marketing expenses due to compensation costs, mitigated by other factors like lower power and utilities costs.

Consequently, operating income fell by -8% from $1.4b to $1.3b in FY24. On a geographical basis, the decrease was from the Americas geography (-$225m) due to various factors like impairment costs ($127m) and higher depreciation costs mentioned previously. Meanwhile, APAC especially appears to be a growth driver for the company, with APAC operating income increasing by $54m (+12%) in FY24.

Net interest income (interest income – interest expense) remained fairly stable in FY24 (+4% from FY23), while income tax expense was also little changed at $161m (FY23: $155m). Hence, Equinix delivered a positive net income of $814m, though this was still 16% lower than the FY23 figure of $969m due to the lower operating income highlighted in the previous paragraph.

Looking ahead, management has guided FY25 revenues to hit $9.0b to $9.1b, representing about a 3.3% to 4.4% growth. However, excluding the (significant) forecast FX impact, top-line growth forecasts would actually have remained around the 7% to 8% level, similar to what we saw in FY24. EBITDA margins are also guided to continue expanding (up 190bps from FY24 to 49% in FY25E) as power costs are expected to head lower in FY25, coupled with the wind-down of one of its existing businesses with negative EBITDA.

More generally, we think management adopted a fairly optimistic tone for FY25 in its latest earnings call. Bookings momentum remains strong with management implying it is taking advantage of this through pricing actions, while management also emphasised it had its ‘largest backlog in three years’. More than half of its 4Q24 volume was from high-performance compute and AI workloads, and looking to 2025, management appears very optimistic on broader industry demand (including for AI). We think its recent FY24 performance and management guidance into FY25 both paint a positive profitability picture for Equinix and its bonds.

Credit highlights

Equinix’s ratios remain pretty decent, as expected from an investment-grade issuer. Net debt to equity has continued to hover around the 0.90x level for the past few years (FY24: 0.87x), while net debt to assets is also very manageable at just about 0.3x – this is helped by its expanding asset base. It also reported a net leverage ratio of 3.4x, and we do not expect (barring updated guidance in future) this to materially increase over the coming years.

Equinix has a well spread-out debt maturity schedule, with half of its debt only due after 2030 (including $1.5b across 2050, 2051, and 2052) (Chart 1). Equinix also has a strong liquidity position, including a sizeable cash position of $3.1b (FY23: $2.1b), and a disclosed liquidity position of $7.5b (which includes short-term investments and undrawn facilities) – for reference, this $7.5b position is about the size of its existing debts up to 2030 ($7.9b).

Equinix reported a low blended borrowing rate of around 2.5%, likely helped by a fairly aggressive issuance schedule in 2019 – 2021 (when interest rates were lower) with coupon rates of 1% (5y bonds issued in 2020) to 3.4% (31y bonds issued in 2021). Its interest coverage was reported at a strong 9.0x in FY24. While interest rates are likely to remain higher for longer, we think Equinix need not hurry in refinancing its debt due to its well spread-out schedule (see previous paragraph). In any case, a significant majority (over 99%) of its debt is unsecured, giving Equinix additional breathing room should it need to raise additional funding in future at reasonable costs (by pledging its assets).

To summarise, we think Equinix’s balance sheet remains strong. We particularly like its debt schedule and low borrowing costs and think it has sufficient headroom to borrow more in future at reasonable interest rates should it need to fund future capex.

Chart 1: Well spread-out debt maturity schedule

About the bonds

The IPG of 3.75% represents a spread of around 118bps over 5y SGS yields (2.573%). We think these new Equinix bonds look attractive compared to its peer STT GDC’s 2028 bonds (yielding around 3.2%), we considering their higher yields, higher spreads over comparable SGSes (about 60bps for STT GDC), and the wider availability of financial data for Equinix as a listed company in the US.

We also compare these new bonds with Mapletree Industrial Trust’s 2029 bonds and CapitaLand Ascendas REIT’s 2029 and 2030 bonds, as they are investment-grade issuers with some exposure to data centres in their portfolios (56% / 9% of assets, respectively). Once again, these new Equinix bonds look attractive relative to its two peers here, especially against Mapletree Industrial Trust 2029s, which has the same BBB+ rating.

Finally, we compare these new bonds with ARTSP and FLTSP 2029 bonds. These have significantly different business exposures to Equinix, but we included them to illustrate indicative yields for similar-rated bonds in the SGD space – around the 3.2% level for BBB and BBB+ in these two examples.

To summarise, we think these new Equinix bonds look attractive relative to its similarly rated peers, assuming its final price guidance is not revised downward significantly. With that being said, our general recommendations will still be for T2 bank bonds, which can offer higher yields (closer to the 4% level) with the downside of loss-absorption risks. These new Equinix bonds will likely be attractive to those who prefer to avoid T2 bonds (which come with loss-absorption risks).

Table 1: Peer comparison (new issue bolded)

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

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