Senator Everett Dirksen is famously alleged to have remarked "
a billion here, a billion there, pretty soon you're talking real money".
Oracle is talking real money; they're borrowing $1.64B each working day. Mr. Market is skeptical that the real money is going to be repaid, as Caleb Mutua reports in
Morgan Stanley Warns Oracle Credit Protection Nearing Record High:
A gauge of risk on Oracle Corp.’s (ORCL) debt reached a three-year high in November, and things are only going to get worse in 2026 unless the database giant is able to assuage investor anxiety about a massive artificial intelligence spending spree, according to Morgan Stanley.
A funding gap, swelling balance sheet and obsolescence risk are just some of the hazards Oracle is facing, according to Lindsay Tyler and David Hamburger, credit analysts at the brokerage. The cost of insuring Oracle Corp.’s debt against default over the next five years rose to 1.25 percentage point a year on Tuesday, according to ICE Data Services.
Mutua reports
that:
The company borrowed $18 billion in the US high-grade market in September. Then in early November, a group of about 20 banks arranged a roughly $18 billion project finance loan to construct a data center campus in New Mexico, which Oracle will take over as tenant.
Banks are also providing a separate $38 billion loan package to help finance the construction of data centers in Texas and Wisconsin developed by Vantage Data Centers,
But notice that only $18B of this debt appears on Oracle's balance sheet. Despite that, their credit default swaps spiked and the stock dropped 29% in the last month.
Below the fold I look into why Oracle and other hyperscalers desperate efforts to keep the vast sums they're borrowing off their books aren't working.
