Tether provides €575 million in unsecured debt financing! Strategic investment in Northern Data

Recently, the stablecoin issuer Tether, which was exposed by The Wall Street Journal for resuming its loan services, is now rumored to have provided a €575 million unsecured debt financing to the Bitcoin mining company Northern Data! Is this a strategic investment? And what funds were used for the investment?

Tether flip-flopping? Originally scheduled to clear secured loans this year, it has now lent out a $200 million short-term loan.

Tether Makes Strategic Investment in Bitcoin Miner Northern Data

Tether announced in September that through its subsidiary Damoon, it made a strategic investment in Northern Data Group.

According to Forbes, stablecoin issuer Tether spent around $420 million to purchase 10,000 Nvidia H100 GPUs, acquiring a 20% stake in Northern Data Group. The publicly traded Bitcoin miner Northern Data plans to lease these chips to AI startups.

An August report by the Financial Times mentioned that Nvidia is expected to ship 550,000 H100 chips this year. Tether's 10,000 chips represent nearly 2% of that total. Northern Data CEO Aroosh Thillainathan stated that this deal could position them as Europe's largest cloud GPU operator, alongside cloud computing giants like Amazon, Microsoft Azure, and Oracle.

As per Forbes, in this complex transaction, Tether will purchase GPUs through an Irish shell company Damoon, with Northern Data holding 70% of the shares, in exchange for a 20% ownership equivalent. Northern Data has the option to acquire the remaining shares of the shell company, but the total cost remains undisclosed. The deal is not yet finalized.

However, Tether mentioned that Forbes' reporting on the size of the stake in this investment was inaccurate but did not protest other content.

Tether Provides Unsecured Debt Financing of €575 Million

According to the Frankfurt Stock Exchange, Northern Data Group signed a loan agreement with Tether, securing €575 million in unsecured debt financing. This financing, under standard market conditions, has a term until January 1, 2030. It will enable Northern Data Group to make investments in its three business lines, Taiga Cloud, Ardent Data Centers, and Peak Mining:

• Primarily to purchase additional advanced hardware to further expand Taiga Cloud as a leading European generative AI cloud service provider
• To expand the data center investment portfolio through Ardent Data Centers
• To further expand its Bitcoin mining business through Peak Mining and adopt dedicated liquid cooling mining technology

With Northern Data's current market value around €800 million ($850 million), Tether providing €575 million in financing, which is over 70% of its market value and as "unsecured" debt financing, may seem illogical. In light of Forbes' report, the involvement in equity investment agreements seems more reasonable.

Tether Indicates Investment and Reserves Are Separate

Tether specifically mentioned that these investments, as disclosed in the reserves report, are separate to ensure they do not impact Tether's reserves or client funds.

In its latest reserve report, Tether stated that the company continues to invest in sustainable energy, Bitcoin mining, data, and P2P technology. Investments in these areas in the third quarter of 2023 amounted to $670 million, reaching $810 million since the beginning of the year.

However, their third-quarter excess reserves are lower than the second quarter! It is evident that Tether has used profits to invest in these companies instead of placing them in reserves, hence they are separate from the reserves!

Did Tether invest $3.2 billion of its $10 billion profit in the third quarter? This is still unclear.