As fibre and data centre securitisation gains momentum, industry leaders at Metro Connect USA 2026 debated whether asset-backed securities (ABS) are ready to become the default funding model for digital infrastructure.

For the fibre and data centre sectors, ABS are financial instruments that enable infrastructure owners to raise capital by bundling future, stable cash flows from fibre-optic networks or data centre properties into securities for investors. It has emerged as a powerful funding solution, particularly after Zayo entered the space in February last year.

Speaking at Metro Connect USA 2026 this week, executive leaders came together in a panel – moderated by Kelly Mellecker, partner at Kirkland & Ellis, to discuss ABS key considerations surrounding securitisation and how fast ABS can scale.

Digital infrastructure becomes the next utility

The numbers alone speak for themselves, as data centre ABS has grown from $2.6 billion annually in 2020 to $14 billion.

Mellecker set the scene: “The ABS market has grown to encompass an ever-expanding definition of digital infrastructure. We can now securitise data centres, fibre, cell towers, small cells, satellite agencies and IPv4 addresses.”

A key theme throughout the panel discussion was the “utility nature” of digital infrastructure assets – and why that makes them particularly well-suited to securitisation. Alexander Kozak, managing director at Guggenheim Partners, pointed to the wholesale fibre model as being a case study in how investor appetite evolves once that utility argument is made.

“Because of the criticality and utility nature of the product, investors are able to look through the concentrated single-tenant risk inherent in the wholesale model,” he explained. “On the fibre-to-the-home side, the wholesale model actually supports a higher leverage profile than the retail model.

“Overall, fibre-to-the-home has gone from four to six times leverage to eight to ten times.”

For Horace Zona, managing director of credit at DigitalBridge, the longer arc of securitisation’s evolution in telecoms is instructive. He explained that firms are increasingly using ABS structures as warehouses for acquisitions.

“Time and again I’ve heard that securitisation can’t finance a particular asset class, and yet securitisation has evolved,” he said. “It gets the borrower more leverage at a cheaper rate, and it has eaten into the leveraged finance marketplace.”

Managing rate risk through the development cycle

The panel went on to discuss interest rate risk – specifically, the gap between how developers think about rate exposure, versus where that exposure ‘actually bites’. Alex Shapiro, director at Riverside Risk Advisors, argued that too many developers focus their hedging activity on the construction period, when the more material risk arrives at stabilisation and refinancing.

“A one standard deviation increase in the treasury over a three- to four-year window is approximately 150 basis points,” he said. “If your interest expense increases because base rates have gone up, your debt sizing goes down. And when debt sizing goes down, you have to plug the gap with additional equity, which erodes returns and depresses value.”

His advice to developers was direct: hedge from the moment a lease is signed, not just when the construction loan is drawn.

“If you’re signing a lease with a hyperscaler and your development yield is around seven per cent, you don’t have much room,” he explained. “In a rising rate environment, 150 basis points can essentially knock you out of the gate.”

Jesse Burros, chief investment officer at Switch, reinforced the importance of using the ABS market itself as a pricing signal for development decisions.

“This market almost functions as a dictionary for how to price development deals today,” he said during the keynote panel. “The bifurcation between how you risk-price hyperscale versus colocation impacts what developers can charge and where we build.”

Capital recycling and what comes next

With annual data centre development spend approaching $125 billion and combined ABS and CMBS issuance sitting at roughly $25 billion, the gap between capital formation and capital recycling is stark.

“Capital recycling is the number one focus for most participants,” said Santhosh Rao, managing director and head of digital infrastructure at MUFG. “Most players in this ecosystem are thinking about all the above – ABS, CMBS, private vehicles, project bonds. There are no single-channel participants.”

Rao also highlighted a structural shift in how assets are being developed from the outset.

“We’ve been working hard with clients to structure assets in a way that allows them to be broken down into smaller, more granular pieces,” he said. “That is what gives you flexibility when it comes to refinancing – whether you go to the ABS market, the CMBS market, or the private placement market.”

Mellecker added: “Getting the best possible lease terms and making sure you have flexibility and separability in releases means you can close an asset into ABS, take it to the CMBS market, or access the private markets.

“It pays to have people thinking about those lease terms from the outset.”

The consensus across the panel was clear: ABS is very quickly becoming a structural pillar. The challenge now is building the market infrastructure, investor familiarity and deal pipeline to match the scale of the opportunity.

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