Oracle's $18 Billion Data Center Debt Faces Pressure Amid Project Hurdles, Report Says

Approximately $18 billion in loans backing an Oracle-leased data center in New Mexico have come under pressure, with syndicate banks quoting the debt at a discount, according to a report from the Financial Times.

Debt Trading at a Discount

The project's loans were recently quoted at 89 to 91 cents on the dollar by banks including Santander and Jefferies, the FT reported. This discount indicates rising investor concern about the risk associated with the debt, which was originally secured late last year from a consortium of banks to finance construction.

According to the report, efforts to syndicate the debt and sell it to a broader group of investors have stalled. This has reportedly forced the underwriting banks to hold more of the project-related debt on their balance sheets than they had initially planned.

Project Faces Local Opposition

The pressure on the debt stems from growing local opposition to the 1,400-acre "Project Jupiter" campus in Doña Ana County. The FT noted that community concerns over the data center's potential impact on local water supply and air quality could threaten to derail the project.

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Regulators have already created roadblocks for the facility. The state land office reportedly blocked a request to run a natural gas pipeline to the site, which was slated to be powered by 2.2 gigawatts of gas turbines. The project is a key component of Oracle's agreement to provide AI computing capacity for OpenAI and is central to its AI infrastructure expansion.

Scrutiny on Oracle's Finances

Investor caution is also being fueled by Oracle's own financial position. The report cites worries over the company's rising borrowing levels and weakening creditworthiness as it ramps up spending on its AI ambitions.

In July, S&P downgraded Oracle's corporate credit rating, leaving it just one notch above junk status. Oracle, Santander, and Jefferies did not respond to requests for comment from Reuters, which cited the original FT story.