SEC Staff Says Fixed-Income Securities Issued in Data Center Securitizations Are Not ABS

The staff of the SEC's Office of Structured Finance, Division of Corporation Finance, has told Latham & Watkins LLP that it agrees that the fixed-income or other securities issued in data center securitizations of the type described in the firm's request are not asset-backed securities ("ABS") as defined in Exchange Act Section 3(a)(79) ("Definitions and application").

The response, dated July 29, 2026 and signed by Kayla Roberts, Chief of the Office of Structured Finance, answers a July 23, 2026, request for interpretive guidance.

The staff did not recite the facts or set out its own analysis. It attached the incoming letter and stated that its view rests on the representations presented.

In that request, Latham argued that data center securitizations fall outside the definition because the securitized assets are not self-liquidating financial assets. It reasoned that the facilities and their supporting infrastructure are tangible, physical assets that endure beyond the tenor of the related securities and may appreciate in value, and so do not by their terms convert into cash within a finite time period, invoking the SEC's longstanding reading of "self-liquidating." Latham acknowledged that a portion of the securitized assets consists of customer contracts, in some cases including leases, but argued that because the revenue they generate is reduced by operating expenses, payments to investors do not depend primarily on cash flow from a self-liquidating financial asset. It also compared the structure to a single-asset single-borrower commercial mortgage-backed security ("CMBS"), contending that the issuer in a data center securitization occupies the position of the borrower rather than of the CMBS issuer, since it continues to own and operate the facility after the securities are repaid.

Latham noted that market participants have complied with Exchange Act ABS requirements since the first such transaction in 2018, across a market now exceeding $50 billion in cumulative issuance, largely because Section 3(a)(79) lists "a lease" among its examples of self-liquidating financial assets.

The staff's agreement is limited to securitizations of the type described in the request, and the factual predicate is detailed: a master trust structure, an operator engaged under a management agreement with broad authority to procure customers and negotiate contracts, securities that are direct obligations of the issuer with recourse to the securitized assets and generally no recourse to the sponsor or operator, loan-to-value generally not exceeding 70% of appraised value at issuance, and an anticipated repayment date of roughly five years against a final maturity of 25 to 30 years.