Nebius takes $3.5bn of secured Citi debt as neoclouds swap converts for collateral

Nebius Group, the Amsterdam-based AI cloud operator listed on Nasdaq, has borrowed $3.5bn from Citi on a senior secured basis to pay for graphics processors and data centres. The agreement was signed on 17 October and disclosed in a Form 6-K and a press release on 22 October. It is a term loan with a single lender, Citibank, acting as mandated lead arranger, agent and security agent, and it matures on 16 October 2027, a few days short of a year after signing.

The size is notable, but the shape matters more. Through most of the AI build-out, neoclouds have paid for chips with equity and convertible bonds, instruments that let them borrow cheaply by handing investors a call on the share price. The Citi facility is the opposite trade: short-dated bank money, priced off a floating rate and secured on almost all of the borrowers' assets.

What the filing says

The 6-K is more precise than the press release. The borrowers are Nebius Inc., the US operating company, and Nebius B.V., its Dutch counterpart, with the listed parent, Nebius Group N.V., as a party. Interest is Term SOFR plus a margin that starts at 2.75% a year and rises by 0.25 percentage points for each 90-day period after 17 October, up to a ceiling of 3.50%, subject to other adjustments. On that schedule the margin reaches its cap in the final quarter of the loan's life.

Security is broad. Lenders take a security interest over substantially all of each borrower's assets, including the shares in the two borrowers held by the parent, subject to excluded assets and permitted liens. There is a minimum liquidity covenant alongside the usual affirmative and negative covenants and events of default. The borrowers may prepay at any time without premium or penalty. Proceeds are earmarked for building out GPU capacity and for general corporate purposes. The filing does not disclose fees or any mandatory prepayment from other financings.

Read together, those terms describe a bridge, not permanent capital. A step-up margin is a lender's way of saying it expects to be taken out, and free prepayment is the borrower's way of agreeing. Ophir Nave, Nebius's chief operating officer, framed the deal in exactly those terms, saying in the release: "Sequencing our financing is how we optimize our long-term cost of capital." The company describes the facility as funding its near-term build-out while it pursues asset-backed financing against what it says are more than $40bn of long-term contracts with investment-grade customers.

From converts to collateral

The shift is easiest to see against Nebius's own recent history. In August it closed a private offering of convertible senior notes raising about $5.75bn: $3.45bn of notes due 2030 carrying a 0.50% coupon and $2.3bn due 2034 at 4.50%, both senior and unsecured. Alongside that deal it exchanged $400m each of its 2.00% notes due 2029 and 3.00% notes due 2031 for roughly 15.8m Class A shares.

In July the company took a different route, raising about $775m in its first senior secured facility. That loan, led by MUFG with a syndicate including ABN AMRO, Bank of America, Deutsche Bank and HSBC, matures on 31 October 2030, is priced at SOFR plus 2.50% and is secured at the asset level on deployed GPUs and the contracted cash flows of a single investment-grade customer. Nebius said those cash flows, together with the facility, cover more than 100% of the capital spending needed for that deployment.

The Citi loan sits between those two models. It is secured, like the July deal, but on the whole of the two operating companies rather than on a ring-fenced pool of hardware and one contract. It is costlier at the outset by 25 basis points, and the gap widens every quarter. And it is a one-year commitment rather than a facility running to 2030. In exchange Nebius gets speed and size from one counterparty, without the dilution or the share price sensitivity that come with convertibles.

That trade makes sense for a company whose equity has been volatile. Reuters reported in mid-October that Nebius shares were up about 114% for the year even as rivals sold off, but neocloud equity has become a weaker currency than it was in the summer, and a convertible priced into a falling stock forces either a lower conversion price or a higher coupon. Secured bank debt avoids that negotiation entirely. The cost is that existing unsecured noteholders, including the August buyers, now rank behind a $3.5bn secured claim on the operating subsidiaries.

The credit backdrop

The timing is telling. In the week before the signing, credit markets delivered their sharpest warning yet about AI infrastructure. Reuters reported on 15 October that the cost of insuring tech borrowers against default had hit record highs. CoreWeave, the largest US neocloud and a company carrying nearly $50bn of debt according to LSEG data, saw its five-year credit default swaps go above 1,100 basis points, while the yield on its 2031 bonds reached as much as 16% before easing to about 14%. Oracle's five-year default protection traded near 300 basis points. Nebius has no publicly traded credit default swaps, so there is no equivalent market reading on its own risk.

Securitised data centre debt has also come apart from the rest of the market. Barclays research cited by The Real Deal at the end of September put hyperscaler ABS spreads at about 150 basis points over five-year Treasuries, 16 basis points wider than a year earlier, and noted that data centre bonds now trade with the wider supply of AI corporate debt rather than with other asset-backed or commercial mortgage paper.

Nebius's executives are keen to draw a line between themselves and CoreWeave. Marc Boroditsky, the chief revenue officer, told CNBC: "We're not carrying the kind of debt that they are." He also said compute prices were rising faster than the company had expected. But the Citi terms suggest that banks are pricing the sector rather than the individual name: a rising margin, a short tenor and an all-asset lien are the protections lenders ask for when they are unsure how a market will look in twelve months.

What it means for the capital structure

For shareholders, the near-term effect is benign. No new shares are issued, and Nebius keeps the flexibility to refinance on better terms once it can pledge specific contracts, as it did in July. The risk is in the timetable. If the asset-backed market tightens further, or if the contracts the company plans to borrow against take longer to convert into deployed capacity, the bridge will grow more expensive each quarter and the refinancing will be done under pressure.

For bondholders, the facility changes the ranking. A senior secured lender with a claim on substantially all assets of the operating companies sits ahead of unsecured convertible holders, and the minimum liquidity covenant gives the bank an early seat at the table if things go wrong. That structural subordination is standard in leveraged finance, and convertible holders in the sector will need to price it.

Our view

The Citi loan is a sensible piece of treasury management and a revealing one. Nebius has avoided selling equity or more convertibles into a nervous market and bought itself up to a year to arrange cheaper, contract-backed debt. The price of that flexibility is a lien on nearly everything and a margin that climbs every 90 days, terms that tell investors where bank credit committees now place AI clouds.

For founders building capital-intensive AI businesses, the lesson is that the cheap money of the convertible boom was a function of rising share prices, not of the assets. When equity wobbles, lenders revert to collateral, covenants and short maturities. Companies with signed, investment-grade contracts can still borrow; those without them will find the window narrower.

What to watch: whether Nebius refinances the bridge with asset-level debt before the margin steps up, how its unsecured convertibles trade now that they rank behind a secured lender, and whether other neoclouds follow it from the convertible market into bank lending.

Sources

• SEC: Nebius Group N.V. Form 6-K, Bridge Facility Agreement (22 October 2026)
• Nebius: Nebius secures $3.5 billion financing facility with Citi
• The Next Web: Nebius borrows $3.5bn from Citi as it says AI compute prices keep rising
• Nebius: Nebius raises $775 million in first secured debt financing to accelerate global buildout
• SEC: Nebius Group N.V. Form 6-K, closing of convertible senior notes offering (August 2026)
• ARY News (Reuters): AI credit worries send default insurance to record high
• Yahoo Finance (The Real Deal): Data center securities flash warning signs over AI debt supply

Filed under AI. Written by Invest Times Editorial under our editorial standards. Commentary and analysis for information only, not investment advice.