Oracle Corp. headquarters campus in Redwood City, California.
(Bloomberg) — Oracle Corp. is seeking to borrow $15 billion from the US investment-grade bond market on Wednesday, as the software maker ramps up its spending to meet the needs of the AI boom.
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The technology giant — which has nearly doubled in value this year — is selling the debt in as many as seven parts, including a rare 40-year bond, people familiar with the matter said, asking not to be identified discussing private details. Initial price discussions for that portion of the deal are in the area of 1.65 percentage point above similarly dated Treasuries.
The deal comes as Oracle begins to fulfill massive cloud infrastructure deals with customers like OpenAI and Meta Platforms Inc., which are boosting the company’s expenses. In the next several years, it is projected to spend hundreds of billions of dollars to rent and power data centers.
The software company spent years trailing the top three vendors — Amazon.com Inc., Microsoft Corp. and Alphabet Inc.’s Google — in the competitive cloud infrastructure market. Now that it has struck serious cloud deals, it’s on the hook for upfront costs. Oracle’s cash flow flipped negative this year for the first time since 1992. Analysts anticipate the metric will be in free fall over the coming years before returning to positive in 2029.
The company didn’t immediately respond to a request for comment. Proceeds from its bond sale can be used for capital expenditures, future investments or acquisitions, or for other general corporate purposes, including repaying debt.
Oracle had about $95 billion of long-term debt outstanding at the end of August, according to a securities filing. With its debt deal Wednesday, a measure of Oracle’s leverage relative to its earnings may climb, though it should still be able to maintain its high-grade ratings, Bloomberg Intelligence analysts Robert Schiffman and Alex Reid wrote.
The cost of insuring Oracle’s debt against default over the next five years jumped to the highest level since May 7 on Wednesday.
Investors are closely watching any changes to Oracle’s financial approach after the company announced earlier this week that longtime Chief Executive Officer Safra Catz would be replaced. “There is uncertainty about whether the strong cost discipline seen under Safra Catz may be disrupted,” wrote Brent Thill, an analyst at Jefferies, on Monday.
Oracle Corp. headquarters campus in Redwood City, California.
(Bloomberg) — Oracle Corp. is seeking to borrow $15 billion from the US investment-grade bond market on Wednesday, as the software maker ramps up its spending to meet the needs of the AI boom.
Most Read from Bloomberg
The technology giant — which has nearly doubled in value this year — is selling the debt in as many as seven parts, including a rare 40-year bond, people familiar with the matter said, asking not to be identified discussing private details. Initial price discussions for that portion of the deal are in the area of 1.65 percentage point above similarly dated Treasuries.
The deal comes as Oracle begins to fulfill massive cloud infrastructure deals with customers like OpenAI and Meta Platforms Inc., which are boosting the company’s expenses. In the next several years, it is projected to spend hundreds of billions of dollars to rent and power data centers.
The software company spent years trailing the top three vendors — Amazon.com Inc., Microsoft Corp. and Alphabet Inc.’s Google — in the competitive cloud infrastructure market. Now that it has struck serious cloud deals, it’s on the hook for upfront costs. Oracle’s cash flow flipped negative this year for the first time since 1992. Analysts anticipate the metric will be in free fall over the coming years before returning to positive in 2029.
The company didn’t immediately respond to a request for comment. Proceeds from its bond sale can be used for capital expenditures, future investments or acquisitions, or for other general corporate purposes, including repaying debt.
Oracle had about $95 billion of long-term debt outstanding at the end of August, according to a securities filing. With its debt deal Wednesday, a measure of Oracle’s leverage relative to its earnings may climb, though it should still be able to maintain its high-grade ratings, Bloomberg Intelligence analysts Robert Schiffman and Alex Reid wrote.
The cost of insuring Oracle’s debt against default over the next five years jumped to the highest level since May 7 on Wednesday.
Investors are closely watching any changes to Oracle’s financial approach after the company announced earlier this week that longtime Chief Executive Officer Safra Catz would be replaced. “There is uncertainty about whether the strong cost discipline seen under Safra Catz may be disrupted,” wrote Brent Thill, an analyst at Jefferies, on Monday.
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