Oracle-linked data center loans fall as New Mexico opposition grows

In short: Investors are getting more nervous about debt tied to an Oracle-leased data center in New Mexico because permits and construction are running late and local opposition is rising.

What's going on

About $18 billion in loans connected to a large data center project called “Project Jupiter” dropped into what traders call “stressed” territory, according to the Financial Times. The loans were quoted at about 89 to 91 cents on the dollar. In simple terms, that means investors are willing to pay less than the full value because they see higher risk.

Project Jupiter is a 1,400-acre campus in Doña Ana County. It is tied to Oracle’s $300 billion contract with OpenAI to supply computing power. A data center is basically a warehouse full of computers that run online services and AI systems.

Banks arranged the $18 billion loan package late last year, along with billions more from investor Blue Owl. But efforts to sell pieces of that debt to other investors have slowed, the report said. One reason is concern about Oracle’s borrowing and its weakening credit profile. S&P downgraded Oracle in July, leaving its corporate rating one step above “junk,” which is a warning label for riskier debt.

Local issues are also adding pressure. The project has faced lawsuits and opposition over water use and air quality. Plans for on-site power have changed, including a shift toward Bloom fuel cells, but requests to connect a natural gas pipeline have been blocked.

What to watch

A judge recently said the air permit process could continue, but the project’s first phase is reported to be at least seven months behind schedule. Investors will be watching for permit progress, funding changes, and New Mexico’s November election, where candidate Deb Haaland has said she would pause new data center approvals if elected.

Source: Financial Times