Terremark Gets $27M for Expansion

Terremark Worldwide, Inc. (TWW) has obtained $27.25 million in financing from Credit Suisse to buy data centers in Silicon Valley and the Washington, D.C. market and complete the build-out of its current Silicon Valley facility, the company announced today. Under terms of the deal, Credit Suisse will purchase the two properties and lease them to Terremark, while providing the company with a $13.25 in financing in the form of a lease commitment. Terremark will later have the option to buy the properties from Credit Suisse at the original purchase price plus accrued interest.

"We are excited to have this financing in place, which will allow us to move forward with our expansion strategy and leverage the significant customer demand we are seeing in these two markets," said Manuel D. Medina, Chairman and CEO of Terremark Worldwide, Inc. "With this funding we can begin contracting with both new and current customers for the two facilities, which will provide a solid foundation to lower our cost of capital as we secure the balance of the financing."

Terremark announced its expansion plans last June and said in November that it had identified sites in both markets. Terremark did not identify the size or location of the properties, but said it expects to apply $6 million of the funding from Credit Suisse to developing them, and another $8 million completing the buildout of the final 10,000 square feet of its existing Silicon Valley facility in Santa Clara.

In its initial announcement, Terremark said it hoped to build 90,000 square foot data centers in both markets, with a price tag of $55 million to $60 million for each facility. The structure of the deal appears to allow Terremark to begin developing and marketing the facilities, while providing time for the company to line up permanent financing to buy the properties from Credit Suisse.

The financing consists of three separate components: $10 million in subordinated debt, $4 million in convertible debt, and the lease commimtent of $13.25 million. Terremark agreed to a 1% increase in the interest rate of its senior secured notes in return for a six month acceleration of its prepayment premium.

"We are very pleased to have Credit Suisse directly invest in our expansion and provide funding for this initial step in our financing plan," Medina said. "This liquidity and the lowered prepayment premium on our existing senior notes significantly increases our ability to improve our capital structure. We will begin working immediately on replacing this interim funding with permanent expansion financing."