How is this different from a 5-10 year lease? You can sell the car to someone (or the construct) and he continue to service the debt or you can service the debt.
Now that am thinking about it (not accountant) does a lease show as debt or not?
I think the point is that Meta really really wanted to avoid getting their credit rating downgraded, and ... went shopping for off-book financial vehicles.
On one hand they (supposedly) have enough "discounted cash flow" to do whatever, on the other hand I guess even they know it's a bubble and fallow years are coming.
My understanding is that the residual value guarantee only covers "most modeled cases" and this case (which might be the only one where the datacenter could not be meaningfully utilized and the guarantee would be relevant) was the not-modelled one...
> This arrangement comes at a steep price. The interest rate on these bonds is as high as 6.58%, significantly above the 5.5% yield of bonds from similar companies to Meta.
so it's definitely not completely junk, but the market priced in the gap (though, for me, it doesn't seem that big of a price difference!)
The issue is the short, 4y renewal cycle, which allows Meta to attempt superficial arguments to avoid accounting consolidation for the variable interest entity that they...pretty much (a) control and (b) have skin in the game.
