--- title: "Oracle CDS Spreads Hit ATH; Morgan Stanley: Massive Capex Demand Concentrated in 2028 Could Trigger Debt Crisis" type: "News" locale: "en" url: "https://longbridge.com/en/news/301445962.md" description: "Oracle's 5-year CDS surged to an ATH of 261 basis points, implying a default probability of over 20%. Morgan Stanley warns that delays in Oracle's data centers are not relieving pressure. If the Wisconsin data center is delayed until 2028 due to power shortages, Jupiter's server rooms may go online simultaneously, and the $9.4 billion construction loan for Abilene will also mature in 2028, leading to a highly concentrated capital demand within a few quarters" datetime: "2026-10-09T23:11:51.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/301445962.md) - [en](https://longbridge.com/en/news/301445962.md) - [zh-HK](https://longbridge.com/zh-HK/news/301445962.md) generator: "portal-rs" --- # Oracle CDS Spreads Hit ATH; Morgan Stanley: Massive Capex Demand Concentrated in 2028 Could Trigger Debt Crisis Oracle's data center construction dilemma is evolving from an engineering issue into a credit risk. Morgan Stanley's latest report points out that **construction delays do not provide breathing room for capital expenditures, but rather concentrate the pressure of massive debt repayment into 2028, creating a fatal overlap with several key financing milestones.** Lindsay Tyler, a credit analyst at Morgan Stanley, explicitly stated in the report that delays "also mean delayed monetization, delayed proof-of-concept, **delayed revenue, and delayed cash flow**." This judgment strikes at the core of Oracle's investment logic—its future contract revenue (RPO) of over $600 billion heavily relies on the timely delivery of AI data centers. As of Thursday's close, **Oracle's 5-year Credit Default Swap (CDS) was quoted at 261 basis points, hitting an ATH, with an implied five-year default probability exceeding 20%,** while the company still holds an investment-grade rating. Market pricing reacted ahead of the report's release. According to Bloomberg, Goldman Sachs' credit division disclosed last week that trading volume in single-name AI CDS surged 400% year-over-year, with Oracle topping the list. Its bonds maturing in 2056 are currently trading at around 82 cents, with yields exceeding 8.3%; the CDS has more than doubled from the levels when Morgan Stanley recommended buying protection a year ago. ## **Wisconsin Power Bottleneck: Delivery May Be Postponed to Mid-2028** Project Lighthouse, located in Port Washington, Wisconsin, is one of two campuses Oracle leases from Vantage. It comprises four buildings with a critical IT load of approximately 902 megawatts, and the contract was signed in September 2025. Externally, the main structure of the buildings is progressing smoothly. Oracle even included drone photos of the construction site in its June earnings presentation to showcase "significant progress." The problem lies in the power supply. The campus requires approval from the Public Service Commission of Wisconsin (PSC) for new transmission lines to connect to the grid via We Energies. The PSC revoked its determination of completeness for ATC's transmission application in August. After the case was closed, ATC reapplied under a new docket, resetting the approval timeline from scratch. Citing relevant analysis, Morgan Stanley pointed out that "there is a substantial risk that **meaningful power supply will not be available until mid-2028**," whereas Oracle's initial delivery timeline provided in its June earnings guidance was the second half of 2027. Morgan Stanley also noted that WEC stated Oracle's S&P rating downgrade triggered additional collateral requirements, with "current ratings already requiring full credit support." In other words, Oracle is paying cash deposits to the utility company in advance for power that it will not receive until 2028. Another ongoing project, Jupiter (located in New Mexico), has previously triggered force majeure clauses. Oracle is evaluating transporting compressed natural gas to the campus by truck, at a cost approximately four times that of pipeline natural gas, while waiting for Energy Transfer's redirected pipeline to arrive next year. ## **The Theory of "Capex Relief" Is Unsubstantiated** An optimistic narrative circulating in the market suggests that construction delays mean GPU purchases and infrastructure spending are pushed back, thereby alleviating balance sheet pressure in the short term. Barclays adopted this logic immediately after Jupiter triggered force majeure, considering the events "credit neutral." Morgan Stanley offered four counterarguments to this view. - **First**, the timing of revenue and cash flow realization is shifted, delaying external verification of whether Oracle's massive investments and backlog of contracts can effectively translate into financial returns. - **Second**, and most concerning to bondholders: **delays do not reduce the total amount of capital expenditure, but only concentrate it.** If the four buildings in Wisconsin are completed and ready for use when the transmission lines become available in 2028, Oracle will have to procure GPUs for all buildings and start paying rent almost simultaneously. At that time, Jupiter's server rooms may also go online, leading to a highly concentrated capital demand within a few quarters. - **Third**, the terms regarding delivery timelines and liability for breach in RPO contracts are opaque to outsiders, creating uncertainty as to whether delays will trigger customers' rights to remedies for breach of contract. - **Fourth**, execution risks may affect customer behavior, thereby suppressing prepayments—prepayments are one of Oracle's important potential sources of financing. Customers may reduce new contract signings or be unwilling to renew existing ones. **Oracle borrowed approximately $43 billion in fiscal year 2026 (ending May 31, 2025) and expects to refinance about $40 billion in debt and equity in the current fiscal year.** In a previous report, Lindsay Tyler estimated that even if Oracle secures another $40 billion in customer prepayments, its parent company's financing needs "may still require completing two large bond issuances before the end of fiscal year 2028." ## **Most Concerning: Debt Refinancing Maturing in 2028** Another detail in the report worthy of close attention is Abilene—the flagship Stargate campus in Texas, and currently the only large-scale project truly in operation, with six of its eight buildings already delivered. The issue lies in the financing structure. **Abilene's $9.4 billion construction loan is on an interest-only payment basis and matures entirely in 2028, at which point it must be refinanced into long-term bonds priced based on Oracle's credit.** Oracle's current credit spread is approaching junk status, and the yield on 10-year U.S. Treasuries touched 5.33% last week, the highest since 2002. Morgan Stanley pointed out that "delayed projects make refinancing for completed projects increasingly difficult"—market concerns about Oracle's credit status are creating a chain reaction through the refinancing pressure on Abilene. From a broader perspective, **the scale of data center construction debt related to Oracle amounts to approximately $79 billion. Of this, about $33 billion (approximately 40%) is concentrated in the Lighthouse and Jupiter projects, both of which have confirmed power delays,** not including the Shackelford County campus—where reports have already indicated that Oracle used trucks to transport gas during initial construction. Most bank loans are short-term, corresponding to 15- to 19-year leases, essentially betting that Oracle can complete refinancing at current spread levels between 2028 and 2032. However, current spread levels are no longer comparable to those when these loans were signed. ## **Watch for the Wisconsin Ruling on October 19** Morgan Stanley admitted that, from Vantage's perspective, the Lighthouse timeline is still "broadly consistent with the goal of completing the entire campus by 2028," and emphasized that its negative view "was formed before project delays," rooted in fundamental judgments. But this is precisely the core contradiction: fundamentals were already under pressure before natural gas had to be transported by truck. According to Bloomberg, Oracle is negotiating with Apollo and Goldman Sachs to finance large-scale chip purchases through off-balance-sheet vehicles. This move may alleviate short-term borrowing pressure on the parent company, but it also continuously adds new layers of competition to the credit buyer market that will ultimately need to absorb Abilene's refinancing. There are two key observation points in the near term: first, the Wisconsin PSC's determination of completeness for ATC's reapplication, expected on October 19; second, Oracle will announce its second-quarter earnings in December, at which time the market will focus on whether the company can propose a specific financing plan. ### Related Stocks - [ORCL.US](https://longbridge.com/en/quote/ORCL.US.md) - [ORAC.US](https://longbridge.com/en/quote/ORAC.US.md) - [ORCS.US](https://longbridge.com/en/quote/ORCS.US.md) - [ORCU.US](https://longbridge.com/en/quote/ORCU.US.md) - [ORCX.US](https://longbridge.com/en/quote/ORCX.US.md) - [ORCZ.US](https://longbridge.com/en/quote/ORCZ.US.md) - [BCS.US](https://longbridge.com/en/quote/BCS.US.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [MS.US](https://longbridge.com/en/quote/MS.US.md) ## Related News & Research - [4,754 Oracle Corporation $ORCL Shares Sold by BDF Gestion](https://longbridge.com/en/news/302313352.md) - [Why did Oracle stock drop today?](https://longbridge.com/en/news/301865261.md) - [‘Read the Fine Print,’ Says Investor About Oracle Stock](https://longbridge.com/en/news/302568791.md) - [Oracle Corporation $ORCL Stock Acquired by Sander Capital Advisors Inc.](https://longbridge.com/en/news/302555820.md) - [Credit stress is threatening to unwind the AI bull. All eyes are on Oracle to hold the line](https://longbridge.com/en/news/302286048.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**