New Delhi: Oracle is up for some fresh cash woes and they have a big data center project in New Mexico that could cost them heavily. Several reports that banks now have the loans attached to this project at a premium cost of 89-91 cents on the dollar, reflecting an increase in risk as a result of the deal. Santander and Jefferies are among the banks involved in the deal.
The data center is being known as “Project Jupiter. It is located on 1,400 acre parcels within the boundaries of Doña Ana County, New Mexico. The property is leased to Oracle, and it has become an important component of the company’s extensive collaboration with OpenAI to provide computing infrastructure for AI.
Late last year, a group of banks lent Oracle $18 billion to get construction started. This debt was to be sold by the banks to a larger segment of the investing public in the future. However that idea has been languishing. Investors appear feeling uneasy with how much it is borrowing, and about the company’s progressively poor financial strength.
The pressure is growing with local opposition. Residents in the vicinity are concerned that the massive project might negatively impact the ground water quality and air quality in the region and about Oracle’s plans to push back could potentially stall or derail its AI growth initiatives. The first hurdle in the project is already overcome: It was to be supplied by 2.2 gigawatts of power from gas turbines, but New Mexico’s state land office rejected a plan to construct a natural gas pipeline to the site.
This comes at a time when Oracle is spending heavily to build out its AI infrastructure. The company has also released a future $248 billion in unrecognized data center lease commitments, which it is looking to convert to new customer demand and revenue. Oracle’s co-CEO Clay Magouyrk has sought to put investors at ease, stating that while the company was in financial distress, it was “fully committed” to maintaining investment-grade credit. Moody’s’ current rating of Oracle, which is two notches above junk, is lower than that of other companies such as Amazon, Alphabet, Meta and Microsoft.
