Morningstar DBRS Finalizes Provisional Credit Rating on EdgeConneX Data Centers Issuer LLC New $150 Million Series 2024-1 Class A-2 Issuance at BBB, Stable Trend

On October 30, 2024, Morningstar DBRS amended this press release to add the ratings table.

DBRS, Inc. (Morningstar DBRS) finalized the provisional credit rating on EdgeConneX Data Centers Issuer LLC's (the Issuer) $150 million Series 2024-1 Class A-2 Senior Notes at BBB with a Stable trend. The rating is supported by the Issuer's continued lease up of the data center portfolio and Morningstar DBRS' review of the associated incremental revenue. A portion of the proceeds of the issuance will be used to pay down $42 million of the currently outstanding $50 million in Variable Funding Notes (VFN).

Since the initial rating in April 2022, the portfolio's annualized monthly recurring revenue has increased from $65 million to $83 million as the Issuer continues to sign new contracts for processing capacity with existing and new tenants, while revenue stability was enhanced with the acquisition of one of leasehold data centers in the portfolio, turning it into a fully owned property. Annualized revenue churn from existing customers has been ~2.9% on an annualized basis, which is below (i.e., better than) Morningstar DBRS' rating case assumption of 10% annually. Actual annual churn, however, does vary significantly from year to year, underscoring the necessity of the financing structure to withstand annual revenue volatility. Additionally, revenue from new contracts comprise a mix of both contracts viewed as more stable long-term service orders as well as short-term (1 or 2 year) service orders or with venture-funded customers which have not yet established a track record of profitability. The long-term stability of such latter revenues is uncertain, and Morningstar DBRS takes a conservative stance with respect to these when incorporating into the long-term rating case projection.

The credit rating assigned to this newly issued debt instrument is based on the credit ratings of an already-outstanding debt series of the above-mentioned debt instrument. Please refer to the press release dated September 27, 2023 (https://dbrs.morningstar.com/research/421151/dbrs-morningstar-confirms-edgeconnex-data-centers-issuer-llc-at-bbb-stable-trends) and the updated rating report dated November 21, 2023 (https://dbrs.morningstar.com/research/423689/edgeconnex-data-centers-issuer-llc-rating-report) for more information, including all relevant disclosures.

RATING DRIVER FACTORS AND FINANCIAL RISK ASSESSMENT (FRA)

(A) Weighting of Rating Driver Factors
In the analysis of EdgeConneX Data Centers Issuer LLC, the Rating Driver factors listed in the methodology are considered in the order of importance.

(B) Weighting of FRA Factors
In the analysis of EdgeConneX Data Centers Issuer LLC, the following FRA factor listed in the methodology (Long-Term Revenue Contracts) was considered more important: minimum DSCR.

(C) Weighting of the Rating Driver Factors and the FRA
In the analysis of EdgeConneX Data Centers Issuer LLC, the FRA carries greater weight than the Rating Drivers.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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