Comment by tgsovlerkhgsel
3 months ago
My understanding is that the residual value guarantee only covers "most modeled cases" and this case (which might be the only one where the datacenter could not be meaningfully utilized and the guarantee would be relevant) was the not-modelled one...
https://www.spglobal.com/ratings/en/regulatory/article/-/vie...
this is the original report
https://longbridge.com/en/news/265411465?channel=WHAB0001
> This arrangement comes at a steep price. The interest rate on these bonds is as high as 6.58%, significantly above the 5.5% yield of bonds from similar companies to Meta.
so it's definitely not completely junk, but the market priced in the gap (though, for me, it doesn't seem that big of a price difference!)
All scenarios are modelled. It's not complicated.
The issue is the short, 4y renewal cycle, which allows Meta to attempt superficial arguments to avoid accounting consolidation for the variable interest entity that they...pretty much (a) control and (b) have skin in the game.