Oracle’s $18bn data centre debt under strain amid local pushback

About $18bn of loans tied to a data centre leased to Oracle in New Mexico slid into stressed territory on Friday, highlighting investors’ fear that increasing local backlash will derail the tech group’s massive AI infrastructure build-out.

Loans linked to “Project Jupiter” were privately quoted at 89 to 91 cents on the dollar by syndicate banks including Santander and Jefferies, according to people familiar with the matter. Healthy debt typically trades within a tight band near par.

The 1,400-acre data centre campus in Doña Ana County is at the heart of Oracle’s landmark $300bn contract with OpenAI to provide computing power. The marquee project secured $18bn of loans from a consortium of banks late last year to kick-start construction, along with billions of equity investment from Blue Owl.

However, efforts to offload the debt to a broader group of investors have hit a wall due to concerns around Oracle’s massive borrowing and declining creditworthiness. The debt secured a private investment-grade rating from credit rating agencies.

Oracle’s corporate credit rating currently sits one notch above junk following a downgrade from S&P in July. Banks were now forced to hold more Oracle-linked project debt on their balance sheets than initially planned, the people said.

Last week, Oracle’s 82-year-old co-founder Larry Ellison abruptly cancelled a $7.5bn share-trading plan without explanation. Oracle’s stock has plunged 50 per cent since it unveiled its $300bn deal with OpenAI a year ago.

Blue Owl declined to comment. Oracle, Santander and Jefferies did not respond to requests for comment. STACK Infrastructure, the project’s developer, also did not respond to a request for comment.

Project Jupiter has faced fierce local opposition over concerns about its impact on the local area’s water supply and air quality. The project was initially going to be powered by 2.2 gigawatts of gas turbines, but the state land office blocked a request to run a natural gas pipeline to the data centre.

In April, Oracle announced that it would power itself with Bloom fuel cells, which emit less sulphur and nitrogen oxides. But permission to connect a pipeline to feed these was also blocked.

The project’s air permit application was paused in August after lawsuits from two environmental groups, although a judge said the process could continue on Thursday.

Deb Haaland, New Mexico’s Democratic gubernatorial nominee and a former US Interior secretary, said she would pause all new data centres if elected in November and require developers to heavily invest in renewable energy.

State filings show Oracle donated more than $12,000 to her campaign in late August. It is not clear how a moratorium could affect the company’s sites.

“Big Tech’s mantra may be ‘move fast and break things’, but here in New Mexico, we do things our way,” Haaland said in a press conference.

A recent poll by the Albuquerque Journal, the state’s largest newspaper, found that 65 per cent of its residents were against the development of large data centres, versus only 20 per cent of respondents supporting such construction.

Project Jupiter’s initial phase is at least seven months behind its proposed date to come online, according to market intelligence firm SynMax. It was expected to be completed by November this year.

Additional reporting by Ryan McMorrow and George Hammond in San Francisco