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Glossary
The jargon behind the AI credit story, in plain words.
- Neocloud
- A company that rents out AI computing power, often on borrowed money (CoreWeave, Nebius, IREN).
- BDC
- Business development company: a fund that lends to private companies. Listed BDCs trade on exchanges; non-traded ones limit withdrawals.
- Net asset value: what a fund says its loans are worth.
- PIK
- Payment in kind: a borrower pays interest with more debt instead of cash.
- Amend and extend
- A lender pushes back a deadline or loosens terms instead of calling a default.
- CDS
- Credit default swap: insurance against a company defaulting. Its price is quoted in basis points (bp); 100bp is 1% a year.
- Redemption gate
- A fund capping how much investors can withdraw in a quarter.
- 10-Q, 10-K
- The quarterly and annual reports US companies file with the SEC. A late one is a warning sign.
- Back-leverage
- A loan a bank makes to a private credit fund, secured on the fund's own loans.
- Shadow default
- A borrower that avoids a recorded default only because its lender amended the loan.
- Mark, at cost
- The value a fund puts on a loan. "97.6% of cost" means it is carried near what was lent, whatever similar debt trades at.
- Hyperscaler
- One of the giant cloud companies (Microsoft, Amazon, Google, Meta, Oracle) that lease most data center capacity.
- Spread
- The extra yield a borrower pays over US Treasurys. 340bp means 3.4 percentage points more a year.
- Tender offer
- How a non-traded BDC lets investors cash out: once a quarter it offers to buy back a slice of its shares, usually capped at 5%.
- Full-cost floor
- What an hour of GPU rent has to earn to pay off the chip, its power and its data center space over a normal life. Rent below it loses money.
- Cash floor
- Just the power, space and running costs of an hour. Owners usually keep renting down to here, since the chip is already bought.
- Opportunity-cost floor
- The least an owner will rent for, given the next best use of the chip, like selling it or running their own work on it.
- Collateral cushion
- GPU rent divided by the full-cost floor. Above 1×, the chips backing a loan earn their keep; below 1×, they earn less than they cost.
- Performance parity
- Comparing chips by price per unit of work, like dollars per petaflop-hour, so an older chip and a newer one can be weighed fairly.
- Risk-neutral default odds
- The default odds a CDS price implies. They include what investors charge for taking the risk, so they run higher than real-world odds.
- Basis
- The gap between two prices for the same thing, like two indexes' H100 rents, or a futures price and today's rent.