The Caisse de dépôt et placement du Québec headquarters in Montreal. The Caisse invests on behalf of 48 clients that represent more than six million people in Quebec.Christinne Muschi/The Canadian Press
The Caisse de dépôt et placement du Québec is backing Australian data-centre company NEXTDC Ltd.’s expansion plans by agreeing to take on as much as $1-billion in hybrid debt that the company is offering to investors.
The Quebec-based Caisse, which manages $517-billion, has made a binding commitment to NEXTDC to apply for the entire 1-billion Australian dollars ($960-million) offering.
The company is also shopping the hybrid securities, which initially pay annual interest of 7.5 per cent for the first five years, to other institutional investors. Depending on uptake, the Caisse’s allocation could be smaller. Hybrid securities are a financial instrument that combines features of both debt and equity.
The Caisse’s commitment, made through its infrastructure team in Australia, is the pension fund manager’s latest move to back the fast-growing data-centre market, looking to capitalize on surging demand from cloud computing and artificial intelligence companies.
Caisse posts 9.3% return in 2025 on gains from stock holdings
Brookfield and Caisse to acquire renewable power producer Boralex for $3.8-billion
Most of the Caisse’s investments so far have been in the form of debt that offers more predictability. Those included a $240-million debt financing announced last month for a data centre in Montreal built by U.S.-based Cologix.
Last year, the Caisse also partnered with alternative asset manager DigitalBridge Group Inc. to buy data-centre developer and operator Yondr Group in a US$5.8-billion deal that stands as the pension fund’s largest equity investment in the sector.
The Caisse invests on behalf of 48 clients that represent more than six million people in Quebec.
The hybrid securities the Caisse plans to buy from NEXTDC will provide the company with money to fund its construction plans, which aim to expand its portfolio of data centre assets. NEXTDC is a data-centre-as-a-service company that builds infrastructure, including servers and electricity to power the buildings, and rents them to customers.
The hybrid securities can’t be redeemed for five years, and have a coupon rate that gradually rises after that, starting at 9.2 per cent and moving higher. At the end of the 10th year, the coupon rate rises by another five percentage points.
The debt is unsecured and will sit below all other company debt in seniority, only ranking ahead of the company’s common shares. Unlike some other hybrid debt securities, these securities cannot be converted to shares in the company.
“We see this as a promising first step in a long-term partnership between La Caisse and NEXTDC,” Caisse head of infrastructure and sustainability Emmanuel Jaclot said in a statement.
The offering closes on April 23, and the Caisse’s allocation will be determined shortly after that.