Rackspace Technology’s $2B loan rises after data center deal with AWD

Rackspace Technology’s loan debt climbed in value after the company struck a data center deal with AWD, signaling that credit markets are warming to the managed cloud provider’s latest infrastructure play.

Rackspace’s debt load in context

As of March 31, 2024, Rackspace reported approximately $2.6 billion in aggregate principal debt, the bulk of it in first-lien instruments.

When a loan “rises,” it means the debt is trading at a higher price in secondary markets. Lenders and institutional investors buy and sell corporate loans like securities, and the trading price reflects confidence in the borrower’s ability to pay. A loan trading at 95 cents on the dollar is a company the market has some doubts about. One trading at par, or 100 cents, is considered solid.

The data center gold rush

Rackspace operates 39 data centers globally. In October 2024, it signed a multi-year Strategic Collaboration Agreement with AWS, aimed at helping enterprise customers migrate workloads to Amazon’s cloud platform.

What this means for investors

Rackspace trades on NASDAQ under the ticker RXT. Carrying $2.6 billion in debt means that even if revenue grows, a significant portion of cash flow gets consumed by interest payments before shareholders see any benefit.

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