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The "fire sale prices" would be so delicious as to guarantee that the entity(-ies) involved stay solvent as long as meta stays solvent.
So that they will lend you the money...
It's not always required, depends on the amount and the business.
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.
Meta has $44.4 billion in cash-on-hand as of September 2025.
I'm correcting you because people can't really fathom just how wealthy these companies are. They could buy startups for billions of dollars with literally the cash they have in their bank accounts, let alone debt or stocks.
I'm asking how you would believe this vehicle would go broke, which is the usual reason to go to bankruptcy.
Meta wants to fund this project, but doesn't want the debt on own its books (because it would impact its vanity AA credit rating). Debt investors are happy to finance a special purpose vehicle guaranteed (in a non debt way) by Meta at a credit rating almost as good as Meta's (say, A). No one is confused this is Meta getting financing for their own project; they've just put it in a wrapper for vanity credit score reasons.
Levine wrote about it and his writing is better than ChatGPT, this snarky website, and obviously mine: https://www.bloomberg.com/opinion/newsletters/2025-10-29/put... .
So it's probably valuable to retain that credit rating.
The real issue here is how simple it is to game the rating agency in this way and how the market allows Meta to "launder" this activity through the ratings agency.
This is, in fact, a fairly close analogue to the housing crisis and the ratings laundering that was done with the CDOs[1]. The difference is, instead of drilling down to thousands of mortgages - each with different characteristics - you really just drill down to Meta ... which might not be too risky ...
[1] https://en.wikipedia.org/wiki/Collateralized_debt_obligation
…someone needs to shake the tree and see what falls out, like Peter Thiel did for SVB.
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 you’re reading about it from blogs then it’s already common knowledge. The structure isn’t actually a one way trick, it’s a set of tradeoffs and protections for the company. They probably could have achieved better terms going direct but with higher risk.
Surely the ratings agency people are "in finance"? Or are they in on the game, and sliding their way back to 2008, writing ratings for "deals structured by cows"?
The mistake throughout this comment section is to assume that the debt is functionally equivalent to Meta haven taken it on themselves, consequences and all. It's not.
Putting things in an LLC vehicle provides some protections. Both for large corporations and you and me as individuals. However if you put an asset in the LLC the lenders also know that those protections exist and will adjust terms accordingly. Meta has taken this into account, found some favorable terms, and pursued that direction.
The narrative that this is a secret loophole that lets them take on debt but also not take on debt is the substack authors doing their thing to make it more sensational than informative.
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.
Meta is borrowing a whole lot of money and they're lying about it to investors.
https://archive.ph/2015.11.08-145615/http://www.wired.com/20...
Just desperate, stupid, or naive lenders trying to get solid returns (and convincing themselves there are no major risk).
Just like ‘08, frankly.
Have enough lawyers, and you can make almost anything legal and aboveboard, no matter how sketchy it actually is. Buyer beware!
Meta: (hiding debt behind its back) No. It's Jimmy's.
Investor: Now Meta, you know lying is wrong.
Meta: No it's not. All the kids do it so it's OK.
It's just a more advanced crypto fraud.
It’s easier to think of this as “project risk” as opposed to corporate risk overall.
This isn’t different than creating a subsidiary to embark on a new program, with its own debts and assets, collateralized by a parent company.
It’s effectively the same as what happens every time a major movie studio starts a new film project.
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.
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.
Meta is a publicly traded company. If they have an agreement wherein they may have to pay substantial amounts to another company or on behalf of another company, that's a liability and they need to disclose that. Whether it's on their balance sheet doesn't really matter, this is what analysts do, back out these types of financial arrangements from the footnotes and publish thumbs up or thumbs down. People like to say "do your own research" but people should not, in general, do their own research.
That’s how you can decide if this is disingenuous or not. If Meta is obligated to repay the loan and used to synthetic means to get it off the balance sheet that’s a problem.
If they have in fact successfully transferred risk to other parties then that’s what deals like this are for. It’s the whole reason the concept of limited liability exists.
I am fully willing to believe it’s the former. But that’s the test.
If those have been offloaded to the LLC, wouldn't that be a pretty key difference?
Basically, if we’re reading about it from substacks and Matt Levine’s newsletter then it’s already fully common knowledge in the finance world.
They aren't, but they're obligated to pay leases for it (they can't just build the datacenter and then walk away), which is kind of like having to repay the "loans".
If the Generally Accepted Accounting Principles don't require that to manifest on the balance sheet, then it sounds like the principles aren't very good ones.
Being conceptually similar isn’t the same thing as identical.
So ChatGPT put this sentence in list form and reordered it a bit. AGI is imminent!
I personally think it’s a great response and makes it clearer what’s happening
Times are changing quickly!
It is definitely not taboo to say you’re writing your own code.
Can you link to another one?