Oracle-linked $18 billion data center loan trades below par, FT says

Summary

• Loans tied to Oracle's New Mexico data center quoted at 89–91 cents on the dollar.
• Banks including Santander and Jefferies stalled in selling the $18 billion debt onward.
• Pricing signals investor doubt about Oracle's borrowing as it builds AI capacity for OpenAI.

The latest

Roughly $18 billion of loans tied to an Oracle-leased data center in New Mexico is trading below face value, with syndicate banks including Santander and Jefferies quoting the paper at 89 to 91 cents on the dollar, the Financial Times reported Friday. Efforts to sell the debt to a wider investor base have stalled, according to the newspaper, leaving lenders holding more Oracle-linked project debt than they had planned.

Details

• The pricing: The loans were quoted at 89 to 91 cents on the dollar by syndicate banks including Santander and Jefferies, according to the Financial Times. Paper trading below par on a newly arranged facility indicates buyers are demanding a discount to take on the exposure rather than accepting it at full value.
• The project: The 1,400-acre campus, known as Project Jupiter, sits in Doña Ana County and forms part of Oracle's broader agreement with OpenAI to supply AI computing capacity. The site secured $18 billion in loans from a consortium of banks late last year to begin construction, according to media reports.
• The syndication: Attempts to distribute the debt to a broader pool of investors have stalled over concerns about Oracle's rising borrowing and weakening creditworthiness, the Financial Times said. Banks are consequently carrying more Oracle-linked project debt on their own balance sheets than they had initially intended.
• The credit picture: Oracle's corporate credit rating sits one notch above junk after a downgrade by S&P in July, according to the report. The company has been increasing spending to finance its push into AI infrastructure, and its growing debt load has drawn rising scrutiny from investors.
• Local opposition: Growing local resistance to the project centers on fears it would affect water supply and air quality, the Financial Times said. The report framed that opposition as a risk that could derail Oracle's wider AI infrastructure build-out, not only the New Mexico site.
• The power problem: Project Jupiter was initially set to be powered by 2.2 gigawatts of gas turbines, according to the report. The state land office blocked a request to run a natural gas pipeline to the data center, removing the fuel route the original design depended on.
• No comment: Oracle, Santander and Jefferies did not respond to requests for comment from Reuters. None of the three has publicly addressed the loan pricing, the stalled syndication, or the status of the pipeline decision.

Background

Oracle's data center expansion is tied to its capacity agreement with OpenAI, which requires building physical AI infrastructure at speed. Financing that build-out has pushed the company's borrowing higher at the same time its credit rating has weakened.

Between the lines

Three pressures named in the reporting point the same way: paper quoted below par, a syndication that has not cleared, and a blocked pipeline for a site designed around 2.2 gigawatts of gas turbines. Lenders left holding unsold exposure on a project facing both local opposition and an unresolved power route have limited ways to reduce it quickly.

What's next

Watch whether syndicate banks reopen the sale or mark the loans lower, any Oracle statement on Project Jupiter's power plan after the pipeline refusal, and further rating action from S&P.

Source: Reuters, Financial Times