Cipher Digital (NASDAQ: CIFR) has announced it intends to sell $850 million of zero-coupon convertible notes that are set to mature in 2032. The announcement was made on Tuesday, October 13, barely 3 weeks after the company agreed to absorb cost overruns to the tune of $359.3 million at its Barber Lake data center in Texas.
Cipher’s decision will serve as an example of how former Bitcoin miners now pay for their AI buildouts. When the cost of construction goes up, they segue to the convertible market.
Who pays for the Barber Lake overruns?
The cost overruns that Cipher is currently paying can be traced back to September 25. Cipher announced on the 25th of September that the contracted life of Barber Lake would be doubled to 20 years.
This caused contracted revenue to spike from $3.8 billion to over $9 billion. The extension of the Barber Lake Lease is coupled with a binding agreement with a leading AI lab. The 10-year commitment is meant to generate an additional $5.2 billion in incremental contracted revenue.
The agreements also featured changes in the party responsible for cost overruns. The company published a reimbursement framework in September 2026. Cipher will absorb the initial $359.3 million of cost overrun, while the tenant handles 50% above the original budget, and only above that line does the tenant cover half, repaid as extra rent over the full 20-year term.
No coupon, a 2030 escape hatch
The notes will mature on the 1st of November, 2032 and will not carry regular interest. Cipher plans to sell them on the private market under Rule 144A, but only to institutional buyers that qualify.
The first set of buyers will have a 13-day option to buy up to $150 million more, taking the deal to the $1 billion mark. Cipher also announced that it plans to swap some of its left-over 1.75% convertible notes due 2030 for common stock.
However, despite the maturity date of 2032, noteholders can compel Cipher to repurchase the notes for cash on November 1, 2030, except that such notes have been called for redemption by Cipher.
This clause means repayment could happen two full years before the maturity date.
Proceeds from the raise would be used by Cipher to fund capped-call transactions that limit share dilution, pour more equity into Barber Lake, build out its high-performance computing pipeline, add development sites, and cover general corporate needs. Conversions can be settled in cash, stock, or a mix, at Cipher’s choice.
Cipher’s share price dropped by 9.6% to $11.75 in premarket trading on Tuesday. It fell from $13 to $11.75, after it traded at $18.74 on September 25, the day Cipher announced the lease extension.
How former miners fund the AI pivot
This is not Cipher’s first rodeo. The company priced about $1.1 billion of 0.00% convertible notes in September last year; those notes are due in 2031. The raise was meant to be an initial $800 million, but it ended up crossing the billion-dollar mark. The funds were to be used for Barber Lake and its HPC pipeline.
Based on reports, Cipher also raised $1.73 billion in secured notes at a 7.125% coupon for Barber Lake and earmarked $2 billion to fund its Black Pearl development.
This is a recurring pattern across the industry. Both TeraWulf and IREN closed convertible deals in October 2025 and May 2026, respectively. TeraWulf is looking to fund its Texas campus, and IREN is looking to expand its AI cloud business.
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