China CITIC Bank International arranges $1.3 billion USD syndicated loan to enable Strategic IDC to acquire a 24.99% equity stake in Global Switch Holdings

Project narrative

On March 29, 2018, a syndicate of lenders — arranged by China CITIC Bank International Limited — entered into an up to $1.3 billion USD syndicated loan agreement with Strategic IDC Limited — a British Virgin Islands-incorporated special purpose vehicle (SPV) and investment vehicle for six Asian institutional and private investors, led by Shagang International (Hong Kong) Co., Limited, the wholly-owned Hong Kong investment arm of Chinese private steelmaker Jiangsu Shagang Group Co., Ltd. (40.94% equity stake) and including AVIC Trust Co., Ltd., the Hong Kong investment arm of Haoyue Capital, and Chinese telecommunications entrepreneur and Global Switch Chairman Li Qiang (4.1% personal stake) — to finance its acquisition of a 24.99% stake in British data center operator Global Switch Holdings Limited. This loan was secured by (i.e., collateralized with) a pledge of the 24.99% acquired stake pledged by Strategic IDC Limited and a charge over the shares of Strategic IDC Limited pledged by its shareholders in favor of security agent China CITIC Bank International. The proceeds were to be used by the borrower, together with capital contributions of its then-shareholders, to finance the acquisition of 2,499 ordinary shares of $0.01 USD each (24.99% of issued shares) in Global Switch Holdings Limited for a consideration of £1,795,031,700 GBP from Aldersgate Investments Limited (a Reuben Brothers company for British billionaire brothers David and Simon Reuben) for the shares and a further £300 million GBP to Aldersgate. Global Switch Holdings Limited is a limited liability company incorporated in the British Virgin Islands that develops, owns, and operates large scale carrier and cloud neutral data centers in Europe and Asia-Pacific. Global Switch is headquartered and based in London, the United Kingdom. At the time of the acquisition, Global Switch operated 12 data centers, 32 MWA Amsterdam West in Amsterdam, the Netherlands; 14 MWA Frankfurt South (operational) and 14 MWA Frankfurt North (under construction) in Frankfurt, Germany; 46 MVA London East and 13 MVA London North in the Docklands, London, the United Kingdom; 18 MVA Madrid in the Canillejas region of Spain; 50 MVA Paris East and Paris West in Paris, France; 100 MVA Hong Kong (under development, but partly operational); 30 MVA Singapore Tai Sheng and 30 MVA Singapore Woodlands (under development, but partly operational) in Singapore; and 80 MVA Sydney East and Sydney West in Ultimo, Sydney, New South Wales, Australia. The acquisition was completed on July 3, 2018, leaving the shareholding of Global Switch Holdings Limited as follows: Elegant Jubilee Limited — a consortium of institutional and private investors from Asia — (51.00% equity stake), Strategic IDC (24.99% equity stake), and Aldersgate (24.01% equity stake). The acquisition was to bring no change to the strategic direction, management, or financial and operational policies of Global Switch and would retain the existing management team, including the chief executive officer and chief financial officer, and all contracts. Strategic IDC would have a right to appoint a director of the Board of Directors. Strategic IDC signed the existing shareholders' agreement, which was also extended, that required all three of the shareholders and the management team to unanimously agree to any decisions until an initial public offering (IPO). Strategic IDC also signed the existing Security Control Agreement with Aldersgate and Elegant Jubilee, an agreement which restricts physical access to the data center sites and maintains security level. The shareholders of Global Switch planned to launch an IPO on an international stock exchange, with Aldersgate and Strategic IDC to retain stakes in it. The Chinese ownership of Global Switch caused national security concerns as governments worldwide began to increase scrutiny of data centers and cross-border data flows. In 2016, upon the first acquisition by Suzhou Qingfeng Investment Management Co., Ltd. of a stake in Global Switch, British Foreign Secretary Malcolm Rifkind publicly discussed the need for British intelligence agencies to review and ensure there were no risks. Plans by Jiangsu Shagang Group to integrate Global Switch into an A-share listed company, which would put more scrutiny of the company in the view of the Chinese Government, contributed to this. In June 2017, the Australian Department of Defence announced it would terminate its cooperation with the company by 2020; the Global Switch Sydney East / West Data Center held top secret information for the Australian Government, including national defense and intelligence arrangements. Global Switch's data centers in Germany and France were subject to disclosure laws in each of those countries, which meant that Jiangsu Shagang's plans would have to be in compliance with them. For its part, Global Switch and Jiangsu Shagang stated their security systems was strong, allowing protection of clients' data. In 2020, Jiangsu Shagang sought to make Elegant Jubilee Limited, a wholly owned indirect subsidiary of Jiangsu Shagang Co., Ltd, a Shenzhen Stock Exchange quoted subsidiary of Jiangsu Shagang, allowing for the company to be listed. Jiangsu Shagang Group in 2020 did increase its indirect equity stake in Global Switch to 51.7%, but ultimately Elegant Jubilee was not fully acquired by it.