Fermi pays $25M to avoid up to $56M of faster loan repayments

Fermi sold shares in its initial public offering at $21.00 each and is building Project Matador, an energy and AI campus in Carson County, Texas, planned around about 11 gigawatts of private-grid power.¹ It had not started earning revenue at June 30, 2026, and targets its first commercial operations in 2027.² Its model is a turnkey landlord: Fermi builds the data center and the power behind it, and the tenant pays rent, with natural gas and variable power charges passed through. The fact sheet lists project financing and large-scale construction among its main risks.³ With 641,259,703 shares outstanding and no preferred stock, Fermi was worth about $2.03 billion at $3.16 a share on October 16.⁴

The loan at issue is a $500.0 million facility from MUFG Bank dated February 10, 2026, which funded three Siemens gas turbines and, per Fermi's release, repaid a pre-existing loan.¹ It sits in a subsidiary, with another indirect subsidiary, Firebird Equipment Holdco, as guarantor, and Fermi's own release called it non-recourse. The quarterly report adds that Fermi could settle such equipment loans by handing over the pledged equipment.² It charges 4 percentage points over a benchmark bank rate, and its effective rate was 12.2% at June 30, when $444.9 million was drawn.³ Draws were allowed for nine months. After that, the quarterly report set a minimum quarterly principal payment of 10% of the balance, cut to 5% if a 400-megawatt lease or power-sale deal was signed by then.⁴ If no 400-megawatt lease was signed by November 10, 2026, the lender could market the turbines to buyers, though it could not sell or foreclose without a default. The loan matures on August 10, 2027.⁵

Fermi's only definitive tenant deal is a lease signed on August 9, 2026 with TensorWave, an AI cloud built on AMD chips: 222 megawatts for 15 years and about $6.5 billion of contracted revenue over that term.¹ Its closing was moved from September 30 to October 31, 2026, and it requires Fermi to obtain project-level financing big enough to fund construction.² On October 13 Fermi said it had signed a credit support agreement with AMD, and its October 14 fact sheet lists AMD's A rating from S&P. That support begins only after construction is complete and rent starts on the final delivery phase.³

Fermi is also fighting its co-founder and former chief executive, Toby Neugebauer, whom a board committee fired for cause on April 30, 2026. The proxy statement put his holdings at 22.47% of the shares, and his group has asked the board to hire an independent investment bank to review major deals.¹ A Form 4 filed by Neugebauer and a family trust reports sales of 2,750,000 shares at $3.7333 on October 13 and 1,297,200 shares at $3.1524 on October 14.²

The stock had fallen from $5.12 on September 22 to $3.40 on October 15, the day before this filing. On October 16 the Financial Times traced a global sell-off this week to worries about the value of AI companies and their huge spending.

The amendment, signed with MUFG as agent and lender, removes the 400-megawatt covenant and the bigger repayments that would have followed a miss, and Fermi paid $25 million in amendment fees for it. MUFG stays on as agent for a new syndicate, or group, of lenders.¹ Fermi believes this removes the potential required principal payments set out above.² That is about $56 million of principal put off, not forgiven: unless the new terms changed it, it still comes due by the August 10, 2027 maturity, so the $25 million fee, nearly half that sum, buys a delay of a few quarters.³ With 222 megawatts signed against a 400-megawatt bar, Fermi needed about 178 more megawatts of contracts by November 10, 2026 to pass the test.⁴

The relief is about timing, not the size of the debt. On the $444.9 million drawn at June 30, the gap between the 10% and 5% payment rates is about $22 million a quarter, the same as Fermi's fourth-quarter estimate.¹ That suggests regular payments of roughly that size are still due each quarter; the founder group's September deck said MUFG repayments begin in November, and the 8-K does not restate the new schedule.² Measured from the first payment in the fourth quarter of 2026 to the August 10, 2027 maturity, the fee buys use of that cash for less than a year.³ Fermi gave $25 million of cash now and got relief from up to $56 million of faster payments through the second quarter of 2027, while the lenders took a fee, gave up quicker repayment, and MUFG kept its agent role.⁴

Against the company, the fee is about 1.2% of market value and about 40% of the $62.5 million of cash on hand at June 30, though that was before the July notes added about $382 million net.¹ Fermi has no revenue, and no operating profit or EBITDA (earnings before interest, taxes, depreciation and amortization) to set it against; its second-quarter net loss was $25.8 million.²

Cash was thin before July. At June 30 Fermi held $62.5 million of cash and $29.2 million of restricted cash, $23.9 million of it tied to this turbine loan.¹ In July it sold $431.25 million of 5.00% convertible notes due 2031 for about $416.8 million net, and spent about $34.5 million on capped calls, leaving about $382 million. Spending is heavy: it put $626.2 million into property and equipment in the first half of 2026.² The quarterly report said its resources were not enough to meet obligations due within a year, which raised substantial doubt about its ability to keep going. Management concluded that its plans, including undrawn equipment loans, ease that doubt. It also warned that liquidity will be materially constrained if the TensorWave lease does not start, or if Fermi cannot sign more tenants and raise more debt or strategic equity.³ At June 30 Fermi said it was in compliance with all material debt covenants.⁴

Two more tests fall on December 31, 2026. The Keystone equipment loan, $77.3 million at June 30, must be prepaid if no approved customer agreement is received by then.¹ Texas Tech University System, which leases Fermi the land under a 99-year ground lease, may end that lease if it has not issued a notice to proceed by that date, and that notice requires a phase one tenant of at least 200 megawatts.²

Gross debt was $536.9 million at June 30; adding the July notes gives about $968 million before any later draws or repayments.¹ The equipment loans are secured by their equipment at subsidiaries, with a limited Fermi guaranty on the Keystone loan and a Fermi guaranty on the second turbine loan, so those lenders have first claim on that equipment. The convertible notes are senior but unsecured.² Ratios like net debt to EBITDA do not apply to a company with no revenue and a first-half net loss of $214.5 million.³ Fermi capitalizes interest during construction, meaning it adds the cost to the project instead of expensing it: $25.78 million in the first half of 2026.⁴

The proxy counted 641,259,703 shares and no preferred stock. The notes convert at 105.0862 shares per $1,000, about $9.52 a share, which would add about 45 million shares, or about 7%.¹ A capped call lifts Fermi's effective conversion price to about $14.64, and even $9.52 is about three times the $3.16 share price.² The quarterly report also says Fermi is in preliminary talks on deals that may issue stock in material amounts, a bigger dilution risk than the notes at today's price.³ The same report adds that more share issuance is likely.⁴ The Yorkville note could be paid in up to 40 million shares, but nothing was drawn at June 30 and advances ran only through October 1, 2026.⁵

Reported losses are swollen by non-cash items. The first-half net loss of $214.5 million included $118.7 million of share-based pay and a $24.8 million loss on paying off an earlier Macquarie loan.

Fermi's forward case, which is a set of goals, rests on the lease. The fact sheet expects phased delivery from the fourth quarter of 2027 into early 2028 and estimates a project-level net operating income margin of about 75% to 80%. That measure is not a standard accounting figure and leaves out depreciation, overhead, interest and capital spending.¹ Its cost guides of $3 million to $4 million per megawatt of power and $10 million to $12 million per megawatt for 156 megawatts of computing capacity imply roughly $2.2 billion to $2.8 billion to build phase one, against an average of about $433 million a year of contracted revenue.² AMD also signed a framework, not a lease, for up to 650 megawatts of future expansion, and Fermi says it has invested more than $1.5 billion in the buildout.³

The strongest bull case is that the waiver removes a November test Fermi could not pass on its signed leases and pushes up to $56 million of principal past the second quarter of 2027, keeping that cash for construction while the lease closes. The lease now has credit support from an A-rated chip maker, and the July notes gave Fermi cash to keep building. If the lease closes and project debt follows, the fee will look like a cheap bridge.

The strongest bear case, ranked by weight, starts with the lease. It still needs project financing by October 31, and AMD's support does not start until the final phase pays rent, so it does not cover construction. Second, the quarterly report says Fermi has not secured more project debt or strategic equity, so it must keep raising money.¹ Third, about $445 million of turbine debt still matures in August 2027. Fourth, the founder group fighting the board sold about 4.05 million shares on October 13 and 14 at $3.7333 and $3.1524.²

The 7.1% drop to $3.16 on October 16, against a 1.1% fall in SPY, a fund that tracks the S&P 500, came days after the founder's sales, so the filings alone cannot say how much of it reflects the waiver.¹ The price is now about 85% below the $21.00 offering price and far below the $9.52 conversion price.²

The dated tests are close. The annual meeting is on October 30, 2026, and directors need a majority of all outstanding shares, so abstentions count against them. The lease's closing deadline follows on October 31, then the Keystone and Texas Tech deadlines on December 31, 2026.¹ The waiver thesis fails if the TensorWave lease does not close or win another extension. The quarterly report says that would materially constrain liquidity, and a lease failure could also open an early termination right under the Texas Tech ground lease. October 31 is the first checkpoint.²

Our call is YES because $2 sits about 37% below the $3.16 close and the July notes brought in about $382 million net, though no filing gives cash after June 30 and the stock fell about 38% from September 22 to October 16; the call fails if the TensorWave lease does not close or win another extension by October 31, which the quarterly report says would materially constrain liquidity.¹ The cushion is not large next to the spending ahead: the quarterly report says finishing the first phases could cost more than $3 billion more, about $2 billion of it in the next twelve months.²

The 8-K gives the $25 million total and says MUFG stays agent for a new syndicate, but it does not say how the fee splits among lenders, whether the rate or the August 2027 maturity changed, or what repayment schedule now applies.

The quarterly report let the lender market the turbines to buyers if no 400-megawatt lease was signed by November 10, 2026. The 8-K removes the lease covenant but does not say whether that marketing right also ends.

The filing does not say whether the $25 million fee will be expensed or treated as a loan cost spread over the life of the debt.

The latest cash figures in the filings are from June 30, when Fermi held $62.5 million of cash and $29.2 million of restricted cash; no filing yet gives cash, spending or loan balances for the quarter that ended September 30.

The Keystone loan needs an approved customer agreement by December 31, 2026, and a qualifying customer agreement ends its $20.0 million minimum-cash test; the filings do not say whether the TensorWave lease counts for either.

Nothing was drawn on the Yorkville note at June 30, when its maximum had fallen to $78.1 million, and advances ran only through October 1, 2026; no later filing says whether Fermi drew on it.