Around $18 billion of loans tied to a New Mexico data centre leased by technology giant Oracle has entered stressed territory as investors fear that local backlash to the project may derail its buildout, the Financial Times has reported.
Loans linked to the 1,400 acre data-centre campus, codenamed Project Jupiter, were privately quoted at 89 to 91 cents on the dollar by syndicate banks including Santander and Jeffries, people familiar with the matter told the paper. Healthy debt should trade within a tight band near par.
The data centre, located in Doña Ana County, is intended to form the heart of Oracle’s $300 billion compute provision to OpenAI. Last year, it secured $18 billion in loans from a consortium of around 20 banks to finance the project, according to Bloomberg, while private equity group Blue Owl separately invested further billions.
However, attempts by the banks to move this debt off their balance sheets have “hit a wall” according to the FT due to concerns around the company’s massive borrowing and declining creditworthiness. In February, the paper reported that at least $56 billion of loans tied to Oracle’s data centre build out were privately given investment grade ratings.
The months since have dampened enthusiasm for the loans, however. The company’s corporate credit rating now sits at BBB, just one stage above junk, after a July downgrade by ratings agency S&P. people familiar with the matter told the FT that this has forced banks to hold more of this Oracle-linked project debt than initially planned.
Project Jupiter has faced “fierce” local opposition over concerns about its impact on the local water supply and air quality, according to the paper. The project was initially going to be fuelled by 2.2 gigawatts of gas turbines, but a request to run a natural gas pipeline to the complex was denied by state officials.
Oracle then announced plans to run on Bloom fuel cells, which produce fewer pollutants, but was also denied permission to run a pipeline to connect to them. The projects air permit was also paused in August after lawsuits from two environmental groups, though a judge ruled last Thursday that the process could continue.
In addition, the Democrat nominee for New Mexico governor, Deb Haaland, has said she will pause all new data centres if elected in November and require developers to heavily invest in renewable energy. Recent polling puts Haaland an average of 11.5 points ahead of Republican opponent Greggory D. Hull.
These difficulties compound Oracle’s ongoing issues. Last week, co-founder and chief technology officer Larry Ellison abruptly cancelled a $7.5 billion share buyback scheme without any explanation, while its share price has fallen more than 55 per cent since this time last year.
.gif "Here’s the iFixit Repairability Rating for the iPhone 18 Pro")
