Data Centre Boom Drives Malaysia Towards Offshore Bond Market
Malaysian data centre operators may soon turn to the offshore US dollar bond market for funding as local banks become increasingly selective in financing this rapidly growing sector. According to S&P Global Ratings, Malaysian data centres are expanding rapidly due to strong demand for cloud services and artificial intelligence workloads.
The credit rating agency estimates that Malaysia's data centre industry will require more than $20 billion in funding over the next three years to support powered shells, power and cooling infrastructure, and equipment. To bridge this funding gap, developers are expected to explore alternative financing sources, including project financing, private credit, and offshore US dollar bonds.
S&P Global Ratings director of financial institutions ratings Nikita Anand noted that Malaysian banks are not yet close to their lending limits, with data centre exposure accounting for only 1% of total loans. However, Anand warned that this could be a constraint for smaller banks with a smaller capital base, limiting their ability to lend further.
S&P Global Ratings director of corporate ratings Yijing Ng emphasized that the first deals in Malaysia or the wider Asia-Pacific market will likely be structured more conservatively as investors become familiar with data centre financing. This means that investors may demand additional protections and comfort before investing in this sector.