Oracle Long Term Bonds Hit Record 8.3% Yield on Junk Status Risk

The cost to insure Oracle's obligations against default climbed to 237 basis points as investors fear a potential credit rating downgrade would trigger a forced exit of $120B in bonds from investment-grade indexes. Long-term bond yields for the company hit an all-time high of 8.3% this week, and its 2056 bonds yielded 8% for the first time. The surge in borrowing costs coincides with $18B in loans tied to the company's New Mexico AI facility trading at approximately 90 cents on the dollar, reflecting mounting anxiety over Oracle's investment-grade status, which is currently one notch above junk.

The credit stress follows Oracle's decision to issue a force majeure notice to Blue Owl Capital, the developer of the 2.45GW Project Jupiter site being built for OpenAI. Oracle is seeking the right to defer lease payments if the facility misses its 2028 opening due to permitting hurdles, including two state denials for a 17-mile gas pipeline required for Bloom Energy fuel cells. While Oracle maintains the project remains on schedule, Morgan Stanley noted that the move puts AI buildout loan and lease documents under greater scrutiny and may complicate future debt financing for other industr