CoreWeave triggered defaults after breaching phrases on Blackstone mortgage | USAEMALL.com

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CoreWeave, the cloud computing group seeking to launch a blockbuster $32bn initial public offering, violated several key terms of a $7.6bn loan last year, triggering a series of so-called technical defaults.

The US company, which leases computing capacity to tech groups building artificial intelligence models, disclosed in the exhibits to its IPO document that it had to ask its biggest lender Blackstone to amend the terms of the loan and “waive” these defaults in December.

While CoreWeave did not miss any payments under the loan facility, it made a slew of serious administrative errors, which stemmed from beginning to use the financing to expand into western Europe. This clashed with key terms that in effect restricted the debt’s collateral to the US.

In debt markets, technical defaults occur when a borrower breaches the terms of a loan rather than failing to make payments on time. While lenders can demand full repayment if the situation is not rectified, they are often willing to sign a waiver that sets aside the default if they believe the borrower acted in good faith.

The default disclosure comes as the New Jersey-based group launched an investor roadshow this week to generate interest for its shares, which are expected to begin trading on Friday. CoreWeave is seeking to raise up to $2.7bn in the share offering, valuing the business at $32bn.

But the group has faced scrutiny over its huge debt burden, complex financial structure, close relationship with chipmaker Nvidia and high customer concentration risk.

One hedge fund manager said that the default incident cast a “horrific” light on CoreWeave’s internal controls given how “obvious” the restrictions were. Another investor, who is considering investing in its IPO was more sanguine, describing it as “a dumb oversight at worst”.

CoreWeave has also separately warned potential investors in its IPO about “material weaknesses in our internal control over financial reporting”. Last June, CoreWeave dismissed RSM as its auditor and hired Deloitte.

CoreWeave was launched in 2017 to mine cryptocurrencies, but pivoted to AI two years later having amassed a large stash of Nvidia graphics processing units (GPUs) — chips that became the world’s hottest commodity for building AI systems.

Nvidia is CoreWeave’s biggest supplier, one of its largest customers and an investor in the company. Microsoft generated 62 per cent of CoreWeave’s revenue in 2024.

The defaults relate to a $7.6bn debt facility CoreWeave secured from a consortium of lenders co-led by Blackstone and Illinois-based hedge fund Magnetar Capital in May 2024. CoreWeave has drawn $4.3bn from that facility as of March 2025 at an effective interest rate of 11 per cent, according to its latest IPO disclosures.

The debts were raised through a special purpose vehicle, CoreWeave Compute Acquisition Co. IV LLC, which is wholly owned and fully guaranteed by its parent company. The SPV pledged an undisclosed number of GPUs as collateral for the loans, as well as services contracts with unnamed “investment-grade” customers, known to include Microsoft.

The terms of the credit agreement require CoreWeave to have contracts with large and creditworthy companies that cover the future debt repayments, although it does also allow for some lending against contracts with junk-rated companies.

The loan also had strict terms, known as covenants, meaning that CoreWeave could not freely send the money raised elsewhere in the business and the SPV had to purchase chips directly.

According to an exhibit attached to the IPO prospectus, CoreWeave violated several of these terms by transferring money to its foreign entities in the UK, Spain and Sweden to purchase GPU servers. This in turn meant that it overstated the number of eligible GPUs pledged as collateral. CoreWeave also breached another covenant by failing to inform the lenders that it was in default within three business days.

The document indicates that CoreWeave had to seek Blackstone’s approval to waive the defaults. The loan was at the same time amended to allow CoreWeave to pledge assets located overseas as collateral in future. 

People close to the situation said that Blackstone did not demand a fee from CoreWeave in exchange for these amendments — something lenders often require to waive defaults — in recognition of the fact it stemmed from an administrative error. They added that the lenders under the facility had since advanced about $500mn of further financing to CoreWeave.

Blackstone declined to comment. CoreWeave did not respond to requests for comment.

CoreWeave has raised $12.9bn of debt and had drawn about $8bn under these loan facilities at the end of last year, according to its latest financial report. The Financial Times reported last week that the company is facing nearly $7.5bn in debt and interest payments by the end of next year.

It is required to begin repaying the principal on the $7.6bn debt facility each quarter from October, and must repay a separate $1bn bridge loan from a group of banks by December. CoreWeave said it would use more than $1bn of the proceeds from its IPO to repay the bridge loan.