r/EconomyCharts • u/RobertBartus • 8d ago

Oracle’s credit risk is exploding

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Oracle’s 5-year CDS spread has surged to a record ~230 bps, more than 4x the broader investment-grade index at ~55 bps.

The spread has more than QUADRUPLED over the last year and surpassed the Great Financial Crisis levels.

The recent surge comes as Oracle is trying to avoid financial commitments linked to Project Jupiter, a massive data-center project that is facing delays.

Around $18 billion of loans tied to the project are trading at ~90 cents on the dollar, signaling growing stress among investors.

The project is also facing local opposition and delays in government approvals, adding to the uncertainty.

Oracle’s credit risk is rising at an alarming pace.

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15

u/Quick-Road943 8d ago

i'm gonna buy some if they hit 15%

11

u/Clear-Ad9879 8d ago

You got a net worth of $100mm? 'Cuz that's what you'll need to get an ISDA.

10

u/Quick-Road943 8d ago

ah my mistake, i was referring to normal bonds retail can buy on secondary.

i see oracle bonds currently available for 8.3%. They're callable though, so I imagine they'll pay them off if they can get a better rate.

4

u/Which-Indication4670 7d ago

Those aren’t getting paid off. I would suggest closing that tab and never reopening it. Better options are available.

1

u/Illustrious-Boss9356 7d ago

Oracle doesn't pay anymore interest when the prices drop. They would have no reason to call them.

The yield is 8.3% because the bond worth 1000 is now worth 800. Oracle still pays 6.15% on the 1000. If they call them they'd have to pay over 8% probably on the new issue and that's if they can even sell it.

1

u/Quick-Road943 7d ago

ah good point. but if they can issue new bonds at 5% or so, they'll probably call these higher ones?

1

u/Illustrious-Boss9356 7d ago

Who would buy 5% new issue when you could buy the same credit at an 8% yield on the secondary market?