Current Affairs Security

Galaxy's $3.5B Bet: How Much Rope Before It Runs Out of Runway

2026-07-26

Galaxy Digital dropped $3.507 billion in senior secured notes on 23 July 2026. Nine-point-eight-seven-five percent coupon. That's $346.3 million in annual interest, payable every February and August starting 2027. The money funds two data center buildings in Dickens County, Texas: 400 megawatts of utility capacity, 260 megawatts of critical IT load. All of it bet on a single anchor tenant, CoreWeave, under a 15-year lease with two five-year options.

Here's the tension: interest payments begin while Phase II is still under construction. Galaxy finished Phase I—roughly 133 megawatts of critical IT load—on schedule in Q2 2026. Phase II data halls don't arrive until H1 2027. That's the same period when Galaxy needs to start writing cheques to debt holders. Before the project generates the revenue to cover them.

The debt amortises at 4% of the original principal annually—about $140.28 million per year. First principal payment comes at least ten months after project completion. On paper, that buys breathing room. In reality, it buys nothing if the timeline slips. Every month of delay pushes both revenue commencement and the debt's repayment schedule backward. The interest clock doesn't stop.

Galaxy acquired Helios from Argo Blockchain in late 2022 for roughly $65 million. Then they took a $1.4 billion loan and threw in $350 million of equity to convert it for AI and HPC workloads. Now this: a third major financing round in three years. The property is being scaled aggressively. That requires perfect execution.

The company models $472 million in rent and $424 million in net operating income for 2028. Ninety percent NOI margin. Those are the numbers Galaxy needs to hit to make the math work. They're also the numbers Galaxy needs to believe in order to justify placing $346 million in annual interest obligations on a project that doesn't exist yet.

The debt is secured against the subsidiary, Galaxy Helios Data Centers II LLC, and the parent's equity in it. It doesn't touch Galaxy Digital's other assets. Smart ring-fencing for the parent. Less reassuring for creditors holding $3.5 billion of notes backed solely by a Texas data center project and a single tenant's demand for capacity.

Galaxy expects Helios to generate more than $1 billion in average annual revenue. The $346 million interest bill is roughly one-third of that. Manageable in theory. Fragile in practice. The calculation depends entirely on two variables: CoreWeave keeps buying capacity at contracted rates, and construction stays on schedule. Slip on either front and the margin evaporates.

Phase I's on-time delivery demonstrates execution capability. That's something. But Phase II carries heightened risk. Two data hall complexes, overlapping construction schedules, and the clock ticking on interest payments before the revenue is there to cover them. Galaxy has built the structure to shield itself from the downside. The debt holders haven't. If CoreWeave's AI workload demand cools, or if Phase II hits snags, the project's economics deteriorate fast and the debt service burden becomes the dominant problem.

Galaxy is banking on sustained demand for GPU capacity and flawless execution. Both are bets. Neither is a certainty.

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