The exponential growth of hyperscale data centres, driven by surging demand for cloud computing, artificial intelligence and digital infrastructure, is reshaping the way these assets are financed. As operators seek to scale rapidly, bank debt funding is moving towards capital markets solutions. Securitisation, particularly in Asia, is emerging as a strategic tool to monetise long-term lease receivables, with offshore SPVs playing a pivotal role in enabling cross-border capital flows.
What is securitisation?
Securitisation involves pooling stable, predictable cash flows, such as lease payments from data centre tenants and transferring them to a bankruptcy-remote special purpose vehicle (SPV). The SPV then issues debt securities backed by those cash flows. Investors receive interest and principal payments, while the originator, in this case, the data centre provider, receives upfront capital arising from the sale proceeds received by it in relation to the receivables sold into the SPV.
There are several options available to securitise the relevant receivables, these being:
- True sale securitisation: Lease receivables are sold or equitably assigned to the SPV, ensuring bankruptcy remoteness from the originator in an enforcement situation.
- Repackaging (Repack): Existing debt instruments are repackaged into new securities with different risk profiles or maturities.
- Master trust structures: Enable ongoing issuance backed by a revolving pool of receivables.
- Hybrid structures: Combine securitisation with project finance or mezzanine layers to optimise capital stack.
Securitisation offers multiple benefits, including, amongst others:
- Capital efficiency: Converts illiquid lease receivables into tradable instruments;
- Risk isolation: Segregates operational risk of the data centre operator from financing risk associated with funding the receivables sold into the SPV; and
- Investor access: Opens the door to long-term institutional capital and the ability to diversify from bank debt. During the COVID-19 pandemic, borrowers with multiple sources of capital benefited from this.
Offshore SPVs in Asia: A growing trend
Asia has seen a steady rise in securitisation activity, particularly in markets such as Singapore, Hong Kong, and Japan. Offshore SPVs, often domiciled in jurisdictions such as the Cayman Islands can be used to facilitate these transactions. Their neutrality and legal robustness make them ideal for bridging local operating entities with global capital markets.
Why offshore SPVs are structurally advantageous
Offshore jurisdictions such as the Cayman Islands are increasingly preferred for establishing borrower SPVs in data centre securitisations. Their legal frameworks and market familiarity offer distinct advantages, these being:
- Bankruptcy remoteness: Offshore SPVs can be structured as orphan entities. This ensures that the SPV is not consolidated with the originator’s balance sheet and remains insulated from group insolvency risk. Legal opinions confirming bankruptcy remoteness are often a prerequisite for rating agency approval;
- Legal certainty and enforceability: These jurisdictions offer well-developed, creditor-friendly legal systems based on English common law. Their courts are experienced in cross-border commercial disputes, and their judgments are widely recognised. This gives noteholders confidence in enforcement scenarios, particularly where assets or obligors span multiple jurisdictions;
- Tax neutrality: Offshore SPVs are typically exempt from income, withholding, and capital gains taxes in their jurisdiction of incorporation. This ensures that the securitisation structure does not introduce additional tax leakage, preserving the economics of the transaction for both the issuer and investors;
- Regulatory and market recognition: Offshore SPVs are widely accepted by arrangers, rating agencies and institutional investors. Their use reduces execution risk and facilitates smoother regulatory approvals, especially in multi-jurisdictional transactions involving PropCos, OpCos and HoldCos; and
- Cross-border structuring flexibility: Offshore platforms allow for efficient bridging of funding flows between local operating entities and global capital markets. They support multi-currency issuance, accommodate diverse legal systems and enable tailored waterfall and priority of payment structures.
Looking ahead: Offshore securitisation as a strategic financing tool
As hyperscale providers continue to expand, securitisation is poised to become a significant financing strategy. Offshore borrower SPVs provide the neutrality, flexibility, and legal certainty necessary to execute these transactions at scale. They are particularly well-suited to address the unique challenges of data centre financing, including long-term lease monetisation, operational risk isolation and investor transparency.
A notable example is Vantage Data Centers’ 2024 £600 million securitisation, which involved the issuance of asset-backed notes via an offshore borrower SPV. This transaction illustrates how offshore structures can be used to isolate cash flows, ring-fence operational liabilities, and create transparent funding platforms that balance issuer flexibility with investor protection.
Shivagar Siva is a Counsel in the Corporate department of Appleby’s Hong Kong office.
