Citi Sees NextDC's Debt-Limit Update Calming Investor Worries

what happened

Citi analyst Siraj Ahmed, as reported by Market Talk, believes a financial covenant update from NextDC should soften investor anxiety about delays at the M3 data center. He expects the Australian data center operator to keep enough covenant headroom through June 2027, although that cushion is likely to shrink over the coming year.

Ahmed also points to a land bank worth roughly 750 million Australian dollars as a further buffer. He takes additional comfort from the fact that the company's covenant math leaves out the portion of the M3 customer agreement where power is already connected and customers are being billed.

Citi rates the stock a buy with a target price of A$21.15. The shares rose 10% to A$6.335.

why it matters

For a data center operator that relies on borrowing to fund construction, covenant headroom directly affects access to financing. Clearer information on debt limits tends to reduce the risk premium on the shares, while the expected narrowing of headroom over the next year keeps the issue in focus.

market impact

NextDC shares: easing worries over debt covenants supports the stock

• ▲NextDC shares pressure up — easing concerns over covenant headroom and debt after the company's update

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