Oracle Debt: Jupiter Loans at 90 Cents, Its Own Bonds at 85

The common read on Oracle debt is that the $18 billion of Project Jupiter loans quoted at 89 to 91 cents on the dollar is a new crack in the AI build-out. Oracle’s own quarterly filing says otherwise: the company’s $125.0 billion of senior notes and other long-term borrowings carried an estimated fair value of $105.7 billion on 31 August 2026, or roughly 84.6 cents on the dollar. The New Mexico project loans are not trading worse than Oracle. They are trading about where the market already prices Oracle itself, and the gap between the two is the real story. Reuters, citing the Financial Times on 18 September, reported that syndicate banks including Santander and Jefferies are stuck holding more Oracle-linked project debt than planned because efforts to sell it on have stalled. The stock closed that day at $147.61, down 1.98%, per Nasdaq.

Having tracked Oracle’s balance sheet through four quarterly filings since the OpenAI contract landed, the more useful comparison is this. Much of Oracle’s bond stack is older fixed-rate paper issued when rates were lower, so part of its discount is plain interest-rate arithmetic rather than credit fear. Syndicated construction loans are usually floating-rate, which strips most of that rate effect out. A floating-rate loan quoted near 90 cents is therefore a purer credit signal than a fixed-rate bond at 85. That is the contrarian point the headlines miss: the Jupiter quote is the market’s cleanest read yet on how much it trusts Oracle’s AI tenancy, and it arrived in the same quarter that Oracle’s own paper slid from 89.3 cents to 84.6 cents on the company’s own fair-value numbers.

What’s actually happening with Oracle debt, and why

Project Jupiter is a 1,400-acre campus in Doña Ana County, New Mexico, that Oracle is building for OpenAI as part of the Stargate programme. Ars Technica puts the total project at $165 billion. A bank consortium lent roughly $18 billion late last year to start construction, and the plan was the standard one: banks underwrite the loan, then sell slices to institutional investors and keep only a small hold.

That second step has not happened. According to the FT report carried by Reuters, attempts to place the debt with a wider investor base stalled “amid concerns over Oracle’s rising borrowing and weakening creditworthiness”. Oracle, Santander and Jefferies did not respond to Reuters’ requests for comment. The silence matters: none of the three parties has disputed the 89 to 91 cent quote.

Think of it like a mortgage on a building let to one tenant who has sublet it to one customer. The loan is only as good as the rent, and the rent is only as good as the chain behind it. Oracle pays the rent; OpenAI, a private company that is not yet profitable, is the customer whose contract justifies it. S&P flagged exactly this link in July when it estimated that roughly half of Oracle’s then $638 billion backlog stems from OpenAI, according to TIKR’s summary of the downgrade.

The site has local problems too. The state land office blocked a request to run a natural gas pipeline to the campus, per Reuters, which forced Oracle to switch from 2.2 gigawatts of gas turbines to 2.45 gigawatts of Bloom Energy fuel cells. On 23 August the New Mexico Supreme Court paused the air-quality permitting process while it oversees two legal challenges from environmental groups, Ars Technica reported. An Oracle executive told county commissioners the project was 26% complete, as reported by Searchlight New Mexico on 8 September.

Oracle insists the timetable holds. On the fiscal Q1 call, chief financial officer Hilary Maxson said “We’re making very good progress,” adding: “In terms of construction, [the] data center is definitely on track,” as quoted by Ars Technica. FinanceFeeds covered the headline numbers from that quarter in its Oracle Q1 earnings breakdown; this piece is about how those numbers are being paid for.

How Oracle and its partners are responding

Oracle’s answer to the funding question has shifted from borrowing to other people’s money. On the fiscal Q1 call, Maxson said the backlog added in the quarter came mostly from structures that shift the bill away from Oracle: “the vast majority of those new contracts were via prepay or bring your own hardware or a similar mechanic so will not require incremental capital from Oracle,” according to the call transcript.

Co-CEO Clay Magouyrk then corrected an analyst who read that as “no capex”. “We said it does not require additional cash from Oracle,” he said, listing three mechanisms: supplier financing that lets Oracle pay for capacity as customers pay it, customers buying the hardware themselves, and customers paying upfront. The 10-Q shows the third one at scale. Oracle booked $11.4 billion of customer prepayments with a significant financing component in the quarter, and its accounting note says such contracts are discounted at a rate “generally consistent with our incremental borrowing rate”. In plain terms, customers are now lending to Oracle through their cloud contracts.

Oracle has also raised equity. It fully used its $20 billion at-the-market programme during the quarter, issuing about 141 million shares for net proceeds of $19.9 billion, per the 10-Q. Shares outstanding rose from 2,880 million to 3,024 million, a 5% increase in three months. It repaid $4.2 billion of senior notes, term loans and other borrowings, and executive chair Larry Ellison cancelled his 10b5-1 plan to sell Oracle stock on 12 September without selling a share under it, per an 8-K filed on 14 September.

The partner side has been bumpier. In December 2025, CNBC reported that Blue Owl Capital, the primary investor in Oracle’s Abilene and New Mexico sites, would not back a $10 billion Michigan facility after talks on debt terms stalled. Oracle disputed the framing. “Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl,” Oracle spokesperson Michael Egbert said. Related Digital’s Natalie Ravitz went further: “The notion that Blue Owl walked away is unequivocally false.”

Oracle is also trying to calm the New Mexico opposition. On 8 September it promised 2 gigawatts of new renewable projects in the state and a public data portal on the site’s air, noise, heat, light and water. Critics were unmoved. “Like all matching programs, this would be synthetic in the sense that 2 GW of renewables wouldn’t directly power the data center,” wrote Michael Thomas, CEO of the Cleanview data platform, as quoted by Ars Technica.

Market impact and data analysis

Putting the 10-Q figures next to each other shows how much of Oracle’s cash flow now depends on its customers’ balance sheets. Operating cash flow was a record $23.1 billion in the quarter. Take out the $11.4 billion of financing-component prepayments and it drops to about $11.7 billion. Set that against $28.5 billion of capex and the underlying cash gap is roughly $16.8 billion for one quarter, more than three times the reported negative free cash flow of $5.4 billion. Maxson guided full-year capex to $90 billion to $95 billion with “not more than $70 billion in net cash CapEx”, per the transcript, so the prepayment stream has to keep growing for the net number to hold.

The off-balance-sheet line is growing faster than the debt line. CNBC reported $248 billion of lease commitments at 30 November 2025. The 10-Q now shows $288 billion of additional commitments that have not started, on top of $34.6 billion of lease liabilities already on the balance sheet. That is $40 billion of new future rent in nine months, while reported borrowings fell by $4.2 billion. Bondholders see the debt shrinking. Rating agencies, which usually count leases as debt, see the total rising.

The equity cost shows up too. Interest expense rose 55% to $1.43 billion, driven by the $43.0 billion of senior notes issued in fiscal 2026. The stock trades at $147.61 against a 52-week range of $114.50 to $329.50, per Nasdaq, and roughly 57% below the $345.72 high CNBC recorded in September 2025. Of the $664 billion in remaining performance obligations, Oracle expects only about 13% to turn into revenue over the next 12 months, the 10-Q says.

The loudest bear case comes from Michael Burry, who disclosed on his Substack in early August that he shorted Oracle at $144.63 and added at about $152, per TIKR. His argument is about accounting: that GPU depreciation is too slow and that lease obligations dwarf current revenue. FinanceFeeds laid out the price scenarios in its Oracle bull and bear case. On Reddit the bull case is holding its ground: a 30 August r/wallstreetbets thread titled “Why I think the market is mispricing Oracle” drew 206 comments arguing that “Oracle is not financing the buildout alone.”

The regulatory and legal pressure points

Three sets of rules now bear on Oracle’s funding, and none of them is a financial regulator acting on Oracle directly.

The first is the rating agencies. S&P’s 9 July cut to BBB- left Oracle on the lowest investment-grade notch with a stable outlook. S&P also widened its forecast for Oracle’s fiscal 2027 free operating cash flow deficit to nearly $42 billion, per TIKR. Many bond mandates can only hold investment-grade debt, so one more notch from any major agency would change who is allowed to own Oracle paper. That is why the project loans matter: investors unwilling to take Oracle risk at BBB- will not take it one step removed at the same price.

The second is bank capital. Loans that were meant to be sold but stay on a bank’s books tie up capital that would otherwise support new lending. The FT’s report that Santander, Jefferies and others are holding more Oracle-linked project debt than planned means that capital is committed for longer. If the paper is marked near 90 cents, the banks also carry a loss on paper. That creates a clear incentive to hold out for better terms on the next Oracle project financing, which echoes the Michigan episode, where CNBC’s source said Blue Owl pulled out over unfavourable debt terms and the structure of repayments.

The third is local and state law, and it is the most direct threat to the Jupiter timetable. The state land office has already blocked the gas pipeline. The New Mexico Supreme Court has paused air-quality permitting pending two challenges. Cleanview’s Thomas argues that even on the fuel-cell plan the data center could be the largest source of emissions in the state. Every month of permitting delay pushes back the date when OpenAI rent starts flowing, while construction interest keeps running. For lenders, a court calendar is now as important as Oracle’s earnings calendar.

The broader policy debate is also moving. On 16 September the House passed the Ratepayer Protection Act 417 to 3, a bill aimed at making data centers pay their own grid costs rather than household ratepayers, though states can still opt out. Any rule that loads more power infrastructure cost onto the builder raises the capital bill that prepayments and leases are meant to cover.

What happens next: three predictions

1. The prepayment line becomes the number that moves the stock. Oracle’s guidance of no more than $70 billion in net cash capex against $90 billion to $95 billion gross only works if customers fund about $20 billion to $25 billion upfront over the fiscal year. Q1 delivered $11.4 billion. If the fiscal Q2 10-Q, due in December, shows that figure falling, the market will read it as customers losing access to capital, and the equity and the loans will reprice together.

2. The Jupiter loans stay stuck until the court rules. Investors will not buy a construction loan whose air permit is on hold at the state’s highest court at anything close to par. Expect the syndicate to keep the paper or sell it in small blocks below 90 cents until the permitting challenge is settled. A favourable ruling would likely do more for the loan price than any Oracle earnings beat.

3. More AI build-out financing moves off Oracle’s books. Every structural signal points the same way: no new bonds in fiscal Q1 after a $25 billion deal in February, the full $20 billion equity programme used, and new backlog written mostly as prepay or bring-your-own-hardware. The cost is that risk spreads to customers, lenders and landlords who price Oracle’s credit directly. That is exactly what the 89 to 91 cent quote shows, and the wider AI capex slowdown debate will decide whether the discount narrows or widens.

Oracle does not need its bonds to trade at par to finish Project Jupiter. What it needs is for the gap between its own credit and its partners’ credit to stop widening. The next two 10-Qs will show whether that is happening.

FAQ: Oracle debt and data center financing

How much debt does Oracle have?

Oracle reported $125.3 billion of notes payable and other borrowings at 31 August 2026, split between $7.6 billion current and $117.7 billion non-current. That is down from $129.5 billion three months earlier after $4.2 billion of repayments. It also carries $34.6 billion of lease liabilities and $288 billion of data center lease commitments that have not yet started.

What are the Project Jupiter loans?

They are about $18 billion of bank loans raised late last year to build Oracle’s Project Jupiter data center for OpenAI in Doña Ana County, New Mexico. Reuters, citing the FT, reported on 18 September 2026 that the loans are quoted at 89 to 91 cents on the dollar and that banks including Santander and Jefferies have struggled to sell them to investors.

What is Oracle’s credit rating?

S&P cut Oracle’s long-term rating one notch to BBB- on 9 July 2026, the lowest investment-grade level, with a stable outlook. The agency cited heavy AI data center spending and the concentration of Oracle’s backlog in OpenAI contracts. A further downgrade would take Oracle bonds below investment grade at that agency.

Why are Oracle bonds trading below par?

Oracle’s 10-Q estimates the fair value of its $125.0 billion of senior notes and long-term borrowings at $105.7 billion, about 84.6 cents on the dollar. Part of that discount reflects fixed coupons set when interest rates were lower. The rest reflects credit concern, which rose after the S&P downgrade and as capex drove free cash flow negative.

Is Oracle issuing more bonds?

Oracle sold $25 billion of notes on 4 February 2026 across eight tranches, with coupons from 4.55% to 6.85% plus one floating-rate note, according to an 8-K filed that week. It issued no new bonds in fiscal Q1 2027, leaning instead on a fully used $20 billion equity programme, $11.4 billion of customer prepayments and supplier financing to fund capex.

Who is shorting Oracle stock?

Michael Burry disclosed on his Substack in early August 2026 that he shorted Oracle stock at $144.63 and added at about $152. His case focuses on slow GPU depreciation and large lease and off-balance-sheet obligations. The stock closed at $147.61 on 18 September 2026, near his entry levels.