Applied Digital (NASDAQ: APLD) has priced and closed a US$1.59 billion senior secured notes offering aimed at funding its next major AI infrastructure project.
The proceeds from the bond issuance are earmarked specifically to finance construction of a 150 MW AI data center at Polaris Forge 1, located in North Dakota.
The notes carry a coupon of 7.000%, which represents a materially lower yield compared to the company’s prior high-yield borrowing levels, signaling improved lender confidence in Applied Digital’s credit profile.
The bonds are secured by first priority liens over the Polaris Forge 1 project entities, with a completion guarantee provided by Applied Digital, concentrating project risk at that level while ring-fencing collateral for bondholders.
The US$1.59 billion in senior secured notes sits alongside a revolving credit facility of up to US$550 million, forming a capital stack that leans heavily on debt to fund AI-focused infrastructure build-outs.
Applied Digital focuses on high-power, compute-intensive infrastructure, and the Polaris Forge 1 project connects the company more directly to long-term hyperscaler demand, a key driver of interest in AI data center capacity.
The bond financing aligns with the company’s broader narrative that long-term hyperscaler leases and access to low-cost power can support project-specific capital raises for AI data center expansion.
Analysts have flagged that Applied Digital currently has less than one year of cash runway, meaning the addition of US$1.59 billion in notes increases the company’s sensitivity to execution delays or cost overruns at Polaris Forge 1.
The company also carries heavy reliance on a small group of hyperscaler customers, including CoreWeave, meaning any contract disruption could affect its ability to service the higher interest costs associated with the expanded debt stack.
On the positive side, the Polaris Forge 1 facility is tied to long-term, take-or-pay style leases, which can support more predictable cash flows once the campus becomes operational.
Access to a large, lower-yield high-yield issuance alongside a multi-hundred-million-dollar revolving credit facility suggests Applied Digital currently retains meaningful funding options to pursue its multi-campus AI build-out strategy.
Investors should monitor Applied Digital’s net debt levels, interest expense, and covenant disclosures tied to both the senior notes and the revolving credit facility as the Polaris Forge 1 project advances.
Progress on construction timelines, the timing of lease cash inflows, and any new financing activity related to Delta Forge 2 will be critical factors in assessing how manageable the company’s leverage position remains over the near term.
