Blue Owl shopped debt for a CoreWeave data center. Lenders weren't sold.

• Blue Owl Capital failed to secure financing for a $4 billion data center project in Pennsylvania.
• One lender said the lack of interest was due to CoreWeave's creditworthiness.
• AI data center investments face financing challenges due to concerns about credit risk.

Blue Owl Capital, a leading investor in the data center boom, was unable to arrange financing for a $4 billion data center it is co-developing in Pennsylvania after pitching lenders to help bankroll the project in recent months.

The facility, 80 miles west of Philadelphia in the city of Lancaster, will be occupied by CoreWeave, a provider of artificial intelligence cloud computing services that has become a closely watched name in the AI race for its rapid expansion — and the billions of dollars of high-interest-rate debt it has taken on to fuel that growth.

An executive who arranges debt for major data center deals told Business Insider that the lack of interest in the Lancaster project was due to growing caution among lenders and investors about taking on sizable exposures to AI players with less-than-sterling credit.

CoreWeave has a below-investment-grade rating of B+, according to S&P Global Ratings.

"We saw it. We passed," a senior executive at a large specialty lender told Business Insider.

The financing executive and the lender did not want to be identified because they were speaking about an industry name they may seek to do business with.

A spokesman for Blue Owl said that the company had "considered" third-party financing for the Lancaster project "as we would with any transaction as we explore alternatives before choosing the most attractive path forward."

The spokesman added that the project, which he said is already under construction, "is fully funded, on time, and on budget."

It is unclear whether Blue Owl has been funding construction entirely from its own capital. If Blue Owl is unable to raise debt for the Lancaster development, it could be on the hook for a potentially huge outlay of cash to pay for the data center's construction.

The situation shows the complications and risks involved in financing the massive buildout of infrastructure for AI computing.

Brennan Hawken, an equity analyst at BMO Capital Markets who covers Blue Owl, said that difficulties to raise debt for the Lancaster project would raise concern.

"I'm not familiar with this deal, but if there is a struggle to find the debt financing, that's a bit of a red flag that I would want to drill into," Hawken said.

Business Insider previously reported that major banks had recent difficulty selling off pieces of $38 billion of debt to finance the construction of two data center campuses that will be anchored by Oracle. Banks often sell pieces of such large commitments to other lenders to spread risk and also reap a quick profit.

The slowdown in interest in participating in that financing was due to worries about Oracle's enormous AI spending and whether the tech company's credit rating could be impacted by those outlays. Oracle has since sought to calm the lending market, announcing that it would raise up to $50 billion of cash from stock and bond offerings in order to "maintain a solid investment-grade balance sheet."

One of the boom's most creative financiers

Last summer, CoreWeave announced it would lease 100 megawatts of initial capacity at the Lancaster data center and potentially expand its commitment to 300 megawatts. The company said it would pour up to $6 billion into the project to equip it with chips and other cloud infrastructure.

A month later, in August, Chirisa Technology Parks announced it would partner with Blue Owl and Machine Investment Group to develop the project. The partnership said it would provide $4 billion of funding, an amount separate from CoreWeave's investment, to support the construction of the project's data center facilities.

In the fall, Blue Owl began shopping the development to potential lenders, a person familiar with that effort said.

Blue Owl has been one of the most creative financial architects of the data center building boom. Last year, it structured a deal to partner with Meta in the ownership of a large data center campus that Meta will build and operate in Louisiana. Blue Owl utilized Meta's strong credit to raise $27.3 billion of investment-grade corporate bonds against its share of the project's equity, proceeds that will be used to help pay for construction, according to S&P.

Blue Owl could arrange a similar type of vehicle that could attempt to tap the credit of an investment-grade customer of CoreWeave's who might use the Lancaster facility or Nvidia, the chipmaker that has purchased large stakes in CoreWeave. It could also potentially raise cash for construction debt by tapping large institutional investor clients to pool together a loan, Hawken said.

Much of the development of hyperscale data center campuses has sought to utilize the strong credit ratings and deep pockets of big-tech partners.

Fluidstack, a peer of CoreWeave's, announced a deal last year to lease a 168-megawatt data center in Colorado City, Texas, which will be built by the crypto mining firm Cipher. Google, Fluidstack's tenant for the project, said it would guarantee about half of the $3 billion due under the 10-year lease. Fluidstack signed another similar-sized lease in December with the data center builder TeraWulf that will also provide "investment-grade credit support."