Property Buyers Are Reopening Signed Deals | Google Nears a $1 Billion Nuclear Deal | EA's Bondholders Allege a Default

11.42%

The share of commercial-mortgage-bond debt in the hands of special servicers in August. That is the most since early 2013.

The Nasdaq closed at a record. Real estate was the only S&P 500 sector to fall. The 10-year yield closed near 5.31%, its highest since 2002. Hyperliquid unlocks $351 million of tokens Tuesday. All go to one institutional buyer.

Rates Are Reopening Signed Property Deals. Troubled Loans Hit Their Highest Share Since 2013.

Property buyers are threatening to walk from signed deals unless sellers cut the price. Many signed when loans were cheaper. The push began as yields rose in late summer. It grew after the Fed's hike last month. "Rates went up, what, just a few days ago and I'm already getting calls," one broker said last month.

Eastham Capital agreed to pay about $20 million for an apartment complex. Its borrowing costs then rose more than six-tenths of a point. It threatened to walk, and the seller cut $600,000. Medalist Diversified took $100,000 off a retail sale in South Carolina.

Few industries feel rates like commercial real estate. More than $5 trillion of these loans are out. That tops what Americans owe on cards and car loans combined.

Values had been on the mend. From late August to Friday, a REIT index fell more than 8%. The S&P 500 gained 1%. Old loans now come due at higher rates. Owners who can't refinance fall behind or go to special servicers.

Lenders still have cash. Several fought to make a $208 million loan for a Brooklyn office-to-apartments project. "It's a very deep, liquid market right now," the winning lender said, though loans cost more.

The 10-year yield has risen five weeks running, its longest streak since 2024. Nothing "changed the equation," one strategist said, citing inflation and the Iran war. A big jump in joblessness could pull yields down, a bank strategist wrote. The jobless rate rose only to 4.2% in September.

A Signed Price Now Holds Only Until Closing

Buyers borrow most of the price, so the rate on closing day sets what they can pay. Lenders are still lending, which pushes the hit onto price, and owners refinancing old loans face the same reset. For sellers and their investors, a signed deal is now an offer the buyer can reopen.

SIGNAL 1: Google Nears a $1 Billion Nuclear Deal. Amazon Signed One Last Week.

Google is close to a nuclear power deal with Constellation (CEG), people familiar said. It would pay $1 billion or more over several years. Last week Amazon agreed to buy 690 megawatts from Constellation. Recent deals favor plants that exist. New ones can take a decade or more to permit and build.

Customers would build data centers "2x faster" if they could, Nokia's chief said. Chips and power are both short. "We're still in the early days," he said.

The Limit Is Megawatts

Power is scarcer than money, so the biggest buyers lock up output from running plants. A new plant means a decade of waiting. Long rates near 24-year highs make that wait cost more.

SIGNAL 2: The Biggest Buyout Ever Faces a $1.4 Billion Default Claim.

Electronic Arts bondholders allege a $1.4 billion default. Saudi Arabia's wealth fund, Silver Lake and Jared Kushner's firm took EA private in August. It was a record leveraged buyout.

If a buyout costs the bonds their investment-grade ratings, holders can claim 101 cents on the dollar. EA didn't pay. It set aside Treasurys to cover the bonds and keep an investment-grade rating. Moody's pulled its rating. S&P signaled junk. Fitch held back a final grade. EA then got an investment-grade rating from Egan-Jones, people familiar said. The Treasurys could cover payments as scheduled, the same people said. But if the bonds were accelerated, they would likely fall several hundred million dollars short.

Separately, KKR (KKR) has struck a deal for Gen II, which runs back offices for private funds. It values Gen II near $5 billion including debt, people familiar said. The companies have not announced it.

The Debt Changed the Credit

The fight is over a 1% premium and a pile of Treasurys. Once the buyout debt arrived, none of the three big raters rated the bonds investment grade. KKR, meanwhile, is buying fees that grow with private funds.

SIGNAL 3: AI Executives Testified Under Oath. Musk's AI Unit Skipped a Subpoena.

Staff of Anthropic, OpenAI, Google and Meta testified under oath on AI risk. New York's City Council held the hearing. Three came only after threats of subpoenas. SpaceXAI defied one, and the council plans to go to court.

Former researchers spoke too. "With reasonably high chance, we are racing to build and grow our own adversary," said one who left Google DeepMind. Jacob Coxon, who left Anthropic, called the industry "extremely reckless." On the current path, humanity losing control is "more likely than not," he said.

No company could put a number on the risk of disaster, Speaker Julie Menin said. Google backed a federal framework. "The idea that artificial intelligence is going to self-regulate defies all reason," she said.

Oversight Arrives by Subpoena

Washington leaves safety to the industry, so a city council is using subpoenas. Its reach is small. But investors funding the build now have sworn answers in which no company put a number on its worst risk.

Leverage turns a rate move into a price cut. EA's new debt left its bonds without an investment-grade rating from the big three raters. Price each leveraged deal at today's rates, including the wait to close.

Yields hit 2002 highs last week. The official who dared bond bears now says he can't control the market. The cost is landing in deals. High rates are repricing assets one deal at a time.