Oracle Debt Comes Under Pressure as Bond Yield Hits Record 8.3%

Oracle bonds hit a record 8.3% yield as credit default swap spreads rise and Project Jupiter loans trade below face value

Oracle’s credit markets came under renewed pressure after the company’s long-term bonds were sold lower, pushing yields to a record 8.3%, according to data shared by Coin Bureau.

The move was accompanied by a sharp increase in Oracle’s five-year credit default swap (CDS) spread. Coin Bureau reported that the spread rose 16% to 227 basis points, also a record level and more than four times the investment-grade index, which stood near 55 basis points.

The developments point to heightened pressure in Oracle’s debt markets as the technology company continues financing a major expansion of artificial-intelligence infrastructure.

Project Jupiter Loans Trade Below Face Value

Separately, about $18 billion in loans tied to Oracle’s Project Jupiter data-center development are trading at around 90 cents on the dollar, according to the Coin Bureau post.

The debt has previously been reported at 89 to 91 cents on the dollar by syndicate banks including Santander and Jefferies, according to the Financial Times as cited by Reuters. The loans are linked to a large data-center campus in New Mexico that forms part of Oracle’s broader agreement to provide computing capacity to OpenAI.

The below-par pricing reflects the fact that investors are valuing the loans at a discount to their face value. Reuters reported that efforts to distribute the debt to a broader group of investors had stalled amid concerns over Oracle’s rising borrowing and weakening credit profile.

Credit Rating Remains Near Junk Status

Oracle’s corporate credit rating has also moved closer markets to non-investment-grade territory. S&P downgraded the company in July, leaving its rating one notch above junk, according to Reuters.

That rating level is significant for Oracle’s large debt portfolio because a further downgrade could have consequences for how its bonds are classified by investment-grade indexes.

Coin Bureau said a downgrade to junk could force $120 billion of Oracle bonds to be automatically removed from investment-grade indexes. The potential change would affect the classification of the company’s debt if Oracle were to lose its investment-grade rating.

AI Infrastructure Spending Adds Debt Pressure

Oracle has been committing substantial capital to expand its AI infrastructure, increasing investor scrutiny of its financing requirements and credit profile.

Project Jupiter is among the major developments associated with that expansion. The 1,400-acre New Mexico campus has faced infrastructure and permitting challenges, including difficulties involving a planned natural-gas pipeline, according to Reuters.

For now, the credit-market indicators highlighted by Coin Bureau include the record 8.3% bond yield, a 227-basis-point five-year CDS spread and Project Jupiter loans trading around 90 cents on the dollar. The potential $120 billion index removal would depend on a future downgrade to junk status.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.