141–150 of 232 posts
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As an example to stimulate your imagination, Walmart has settled as recently as 2019 to resolve liability due to weak internal controls that allowed “third party affiliates” to bribe local officials and others in various ways.
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banks are not stupid… you can’t just open LLC, borrow billion bucks, spend it and then be like “oops, LLC mates, not liable”
You can if you are Meta and are willing to litigate the hell out of it.
Nobody is trying to pull one over on a bank here. Pricing the risk of the loan is a bank’s whole business, they’re happy to loan to meta because meta is meta, and they’re a good candidate for a loan.
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Does it need to be a secret to be noteworthy, especially if it’s apparently working despite not being a secret anymore?
I meant to say it's not new information. The blog post I linked is from a month ago. It is also more accessible for casual reading.
So? As usual, xkcd 1053 applies :) https://xkcd.com/1053/
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https://news.ycombinator.com/item?id=45628186
But the one thing that doesn’t compute is the commitment. There is a long term obligation now incurred by meta to use this infrastructure. If it’s a capital lease I assume this is now a liability on their books (and disclosures)?
Fade-Dance had a fairly reasonable answer to it:
Maybe they don't want to securitize their core assets and introduce a new favored class of investor. Ex: If they are securitizing their AI data centers as part of the initial capital raise, those investors would be higher up the capital stack. They would get the datacenter in a theoretical bankruptcy before the bond/equity holders got their cut of the liquidation. Intel securitized their new fab builds with Brookfield and Apollo and, as a shareholder at the time, it didn't feel great. No idea what the precedent is regarding Meta by the way, just a thought. Maybe they think that the lenders are a bit "overzealous", and they want to push the risk of things like write down on GPU racks entirely onto external parties who are apparently all too happy to take the risk. I'm guessing it's a mix of both, combined with the fact that we're seeing some copy and paste thinking. This is proving to be a way to get fast access to the huge private credit market. I would assume there must be some very wide deal flow pipes cranking currently, so why not tap into them if the demand is there in the other end.
I've seen at least two different commercials each focused entirely on the personal story of a relatable, folksy person living in a small town in a fly-over U.S. state, talking about how the town was declining and times were hard - then Meta built a new data center nearby and this person along with many others got jobs there and now things are great. They are very well-produced with cinematic shots of rustic small-town main streets, dusty pickup trucks in rural settings and local high school football games. Aside from the obvious brand-washing, it would be extra on-brand if it turns out Meta doesn't even own the data center but still tries to take credit for it.
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There are a lot of places where the credit ratings are hardcoded (to borrow a term) into funds. There are pension funds and other vehicles that might be bound to only invest in AA rated companies. So if a company drops their AA rating it could force them out of a lot of funds and investment vehicles. This complicated vehicle where the debt and assets are in another LLC isn’t actually tricking anyone in finance. If yo…
Instinctively I try and simplify things. It this was a person with an excellent credit score, it’s as if the person is taking on extra debt to start to create something they need, but trying to hide it.
They will also have to pay a premium and give up more for debt to the LLC because the lenders know this.
The same is true for Meta.
The finance world isn’t blind. None of us hear are stumbling upon hidden knowledge that the lenders didn’t already have.
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This article is poorly written. It’s so desperate to be clever and edgy that it’s hard to get the facts out of it. ChatGPT isn’t really a solution because the source is both low quality and has questionable motives. Going to any of the other good articles on the subject that have been linked in this comment section is much better.
It's well written for its target audience, people who are used to reading financial analyses.
The target audience is people who want to be angry at Meta and think that they’re smarter than finance people.
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My personal experience with LLC loans and banks is that the bank is using the assets as collateral and me as a backstop.
I thought the whole point of LLC was to limit liability so you wouldn't be liable for debt beyond your paid up capital? Why would you ever sign a personal guarantee?
So that they will lend you the money...
It's not always required, depends on the amount and the business.