A unit of Brookfield Asset Management Ltd. raised the size of a credit facility to Compass Datacenters LLC shortly before Brookfield and other investors struck a deal to buy control of the Dallas-based company.
Brookfield-managed infrastructure debt funds approved a $400 million increase to the facility in early June, taking it to $1.1 billion, according to people familiar with the matter. Then, on June 20, Brookfield Infrastructure Partners LP announced it had joined forces with Ontario Teachers’ Pension Plan to acquire the company, which operates data centers in the US, Italy and Canada.
The deal is expected to close by year-end.
Brookfield’s plan to own both the debt and equity of Compass illustrates the multiple roles alternative asset managers are playing in deals as they expand their direct lending activities. Although it’s not uncommon for the same firm to participate in multiple parts of a company’s capital structure, the situation can create the potential for conflicts in decisions about how to use a company’s cash — whether to prioritize dividends or debt repayment, for example.
Compass will deal with any possible future conflicts of interest by having representatives from the Ontario Teachers’ fund take charge of any discussions related to Brookfield’s loan to Compass, said the people, who asked not to be identified because the matter is still private. Representatives for Brookfield and Ontario Teachers’ declined to comment.
Compass plans to use the expanded credit facility for a variety of purposes, including capital expenditures, the people said. “The loan increase was done in normal course on a competitive basis with proceeds supporting the continued growth of the Compass business and was approved through our existing governance with current equity owners including OTPP,” Compass President Jared Day said in an emailed statement.
Last week’s deal valued Compass at $5.5 billion, including debt, people with knowledge of the matter told Bloomberg. The amount of equity that Brookfield and its institutional partners are putting into the transaction couldn’t be learned, but Brookfield and Teachers will each control 50% of the company, according to the people. Ontario Teachers’ has been an investor in Compass since 2017.
Brookfield Infrastructure shares have risen 14.3% this year in New York, while Brookfield Asset Management is up 13.8%.
(Updates with share movement in last paragraph. An earlier version corrected company name in first paragraph to say Ltd. instead of Inc.)
Author: Esteban Duarte, Layan Odeh and Paula Sambo