<p>Faced with Oracle's massive financing needs for AI infrastructure, Wall Street banks' balance sheets are nearing their limits. To mitigate risk exposure and free up capacity for continued lending, banks are eager to &#34;securitize&#34; and sell off hundreds of billions of dollars in loans related to Oracle's data center projects to insurance companies and private credit funds.</p>
<p>According to insiders, at least $56 billion in data center construction loans have received investment-grade ratings, supported by future lease revenues from the $300 billion deal Oracle reached with OpenAI. Obtaining an investment-grade rating for infrastructure loans in the construction phase is extremely rare, allowing banks to attract insurance and private credit funds that typically avoid such risks.</p>
<p>Although the rating packaging has opened new funding channels, the market has not fully embraced it. As banks rush to offload debt to reduce excessive risk exposure to the AI financing boom, related financing costs are rising significantly. Some investors are taking a wait-and-see approach, anticipating higher future returns, while the borrowing cost spread for new projects has widened to near junk bond levels.</p>
<p>Meanwhile, Oracle has not slowed its aggressive expansion pace. According to Bloomberg, the company plans to refinance $50 billion through bonds and equity by 2026. This strategy of maintaining &#34;heavy asset&#34; expansion under significant debt pressure not only makes banks nervous but has also attracted the attention of well-known short-seller Michael Burry.</p>
<h2>Bank Capacity Crisis: Borrowed from Every Possible Source</h2>
<p>In traditional project financing models, banks typically hold infrastructure loans for projects like highways or airports themselves. However, the sheer scale of recent AI data center projects has completely overwhelmed banks' conventional capacity. Tech giants urgently need to find new sources of capital, while banks must clear old debts before continuing to lend.</p>
<p>&#34;We've basically knocked on the doors of every project financing bank, but the number of banks is limited,&#34; said a banker familiar with Oracle's financing activities. &#34;If banks want to continue lending, they must offload these risks.&#34;</p>
<p>This sense of urgency has prompted banks to push rating agencies to rate loans in the construction phase. Insiders say that the $56 billion in loans covers Oracle's $38 billion data center facilities being built in Texas and Wisconsin, as well as an $18 billion data center park in New Mexico supported by Blue Owl Capital. Both loans are currently being marketed to investors.</p>
<h2>Rating &#34;Reform&#34; and the Entry of Insurance Capital</h2>
<p>Securing investment-grade ratings for projects in the construction phase is seen as a &#34;transformative&#34; move in the industry. This effectively opens up a whole new pool of institutional capital for such assets—primarily insurance companies and pension funds, which previously avoided non-operational assets due to high risks.</p>
<p>Christine Brozynski, a partner in infrastructure project financing at law firm Norton Rose Fulbright, stated that while obtaining credit ratings during the construction phase in the data center sector was once extremely rare, it is now &#34;becoming common.&#34; She noted that nearly all large data center transactions are now attempting to obtain credit ratings
In the latest transaction structure, more than a dozen banks have lent against Oracle's long-term lease commitments as collateral. STACK Infrastructure, responsible for data center development in New Mexico, confirmed that the deal is currently in the syndication distribution phase and has received an investment-grade credit rating, with progress in line with expectations.</p>
<h2>Market Congestion and Soaring Financing Costs</h2>
<p>Despite passing the rating threshold, investor concerns are growing over Oracle's aggressive AI spending commitments and its mounting debt.</p>
<p>According to a research report released by TD Cowen on January 26, while the current transaction pricing is SOFR plus 2.5 percentage points, the borrowing costs for newer Oracle-related data center projects that have not yet been sold to investors have widened to SOFR plus 3 to 4.5 percentage points—this level is approaching the pricing of junk-rated debt.</p>
<p>Some investors are hesitant about two Oracle-backed syndicated loans currently on the market, anticipating that higher-yielding assets will be released in the future. &#34;The elephant in the room is—whether there is enough appetite to invest in these notes, after all, there may be higher-yielding products coming out in two weeks?&#34; said a senior project finance banker in the U.S.</p>
<p>Another investor who purchased bonds from other data center projects pointed out that banks are feeling nervous about their increasing AI financing exposure and are looking for ways to offload the debt they have committed to provide. To close the deals, banks have had to offer higher interest rates than expected to the buyers.</p>
<h2>Expanding Against the Wind: $50 Billion New Financing Plan</h2>
<p>While banks are eager to &#34;find buyers,&#34; Oracle has not slowed its pace of capital expenditure. According to Bloomberg, Oracle announced in a statement on February 1 that it plans to raise up to $50 billion through bond and equity financing by 2026 to meet the cloud infrastructure needs of major clients such as AMD, Meta, Nvidia, OpenAI, TikTok, and xAI.</p>
<p>According to the plan, Oracle will raise about half of the funds through the issuance of mandatory convertible preferred securities and a market equity plan of up to $20 billion, with the remainder to be raised in early 2026 through the bond market. This will further increase the company's debt burden. According to Bloomberg data, Oracle currently carries about $95 billion in outstanding debt, making it one of the largest corporate bond issuers outside the financial sector.</p>
<p>Oracle stated that this move is to &#34;build additional capacity&#34; and committed to maintaining its investment-grade rating by keeping its debt load within manageable limits.</p>
<h2>Short-Selling Target: Fragile &#34;AI Bubble Carrier&#34;</h2>
<p>Oracle's aggressive strategy of transitioning from a &#34;light asset&#34; software vendor to a &#34;heavy asset&#34; cloud infrastructure provider, along with the resulting deterioration of its balance sheet, has raised market vigilance.</p>
<p>As previously reported by Wall Street Insights, Michael Burry, the prototype of the movie &#34;The Big Short,&#34; recently disclosed that he has shorted Oracle. He criticized the company for engaging in &#34;unnecessary heavy asset expansion,&#34; attempting to compete with cloud giants through expensive data center construction, and referred to it as a &#34;pure AI bubble carrier.&#34;
Burry pointed out that, unlike tech giants like Microsoft, Alphabet, and Meta, which have strong core business moats, Oracle lacks sufficient safety cushions. The high-risk transformation under heavy debt makes its financial structure particularly fragile. If AI demand falls short of expectations, Oracle's extremely low margin for error will expose it to significant survival risks</p>

ORCL

<p>Wall Street banks are running out of credit limits and are urgently trying to "package" and sell off hundreds of billions in loans to Oracle, but the financing costs are already approaching junk bond levels. Ignoring "big short" Burry's attacks, Oracle still plans to raise another $50 billion to gamble on heavy assets. As AI ambitions collide with the liquidity wall, the risks of this high-leverage game are nearing their limits</p>

- Wall Street banks are nearing their limits in financing Oracle's extensive AI infrastructure, with banks eager to sell off billions in loans through securitization to mitigate risk.  
- Despite achieving investment-grade ratings for $56 billion in loans linked to Oracle's data centers, rising financing costs and market skepticism pose challenges.  
- Oracle, under pressure from banks, continues its aggressive expansion plan, aiming to raise $50 billion by 2026 for cloud infrastructure, amid concerns over its substantial debt and market vulnerabilities.

Scared of being borrowed! Banks are eager to find a "buyer" for Oracle's $56 billion debt, with insurance funds and private equity stepping in