Oracle data center secures $16 billion financing after months of investor pushback

Oracle Data Center Nears $16 Billion Financing After Twisty Path

Related Digital is finalizing $16 billion of financing for a giant Oracle Corp. data center, after months of stop-and-start negotiations with investors. The developer has been rounding up cash to build a Michigan campus that would allow Oracle to power applications for OpenAI. The financing follows other massive debt packages that banks assembled for Oracle data centers: a $38 billion debt deal to build facilities in Texas and Wisconsin, and $18 billion for a New Mexico site. The protracted process involving the project in Michigan's Saline Township shows how Big Tech's debt-fueled AI splurge is running into more intense scrutiny from Wall Street. Blackstone Inc.'s equity investment will be less than anticipated at roughly $2 billion, according to people familiar with the matter. An additional $14 billion debt financing led by Bank of America Corp., originally slated as a construction loan, is now expected to involve a bond issuance, some people said. The financing is set to close as soon as this month. The offering is another test of investor sentiment about Oracle's AI spending and the complex arrangements that keep debt off its balance sheet. Oracle promises to lease the data center while the resulting payments backstop the debt that investors provide to an entity created to fund the construction. "We are proud of the rapid progress that's been made both in financing and developing our data center," Oracle said in a statement about the Michigan deal. Financing will be completed shortly, the project is on schedule, and the first steel columns have just been installed, Related Digital, a venture of New York-based property developer Related Cos., said in a separate statement. Blackstone and Bank of America declined to comment. Fierce Pushback Early on, some investors questioned whether a campus with a planned power footprint bigger than a nuclear plant would survive legal challenges and fierce pushback from locals. Talks inside Blackstone over a potential investment ground to a halt in September, when Saline Township officials denied Related Digital's request to build data centers in what had been an agricultural zone, people said. Blackstone warmed to the idea only after the officials and Related Digital reached an agreement the following month. The alternative asset manager's $2 billion equity commitment is about half of what had initially been discussed, people said. Meanwhile, a campaign to raise an additional $14 billion debt financing, originally expected to wrap up in January, was complicated by questions from potential lenders over the terms of Oracle's lease, which define the fees that would backstop the debt, people involved in the talks said. Lenders demanded changes on Oracle's lease terms and sought clauses that would guarantee payments regardless of whether all of the data-center capacity was used, the people said. On Jan. 26, analysts at TD Cowen told clients they had seen evidence that Oracle data-center leases that were under negotiation had struggled to secure financing. "In cases where US banks are still open to lending, our checks indicate that borrowing cost spreads for Oracle-linked data center projects have widened to non-investment grade levels," the analysts, led by Michael Elias, said in a note to clients. They noted the spreads had risen by as much as 225 basis points between September and January to as high as 450 basis points over a benchmark rate. A breakthrough for the Michigan project came when Oracle showed a willingness to tighten some leasing terms. Then, on March 10, Oracle reported earnings that beat Wall Street estimates, fueled by stronger sales in its infrastructure business, and forecast robust demand for AI computing. While that gave Oracle shares a temporary boost, they're still down about 25% this year. Cash Burn Oracle, a key player in the AI infrastructure initiative known as Stargate, is spending so much to build out capacity to run customers' computing processes that it's operating with negative free cash flow and plans to cut thousands of jobs. Its fortunes are increasingly intertwined with ChatGPT-maker OpenAI, which is burning through cash without signs of showing profits anytime soon. S&P Global Ratings has projected that Oracle will run a free operating cash flow deficit in coming years as it spends more aggressively, eroding its credit profile. Oracle's debt-raising boom has saddled some banks with large exposure to the technology giant. Meanwhile, banks such as Natixis SA and Banco Santander SA have sought to sell data-center debt tied to Oracle, some of the people familiar with the matter said. While Santander declined to comment, a Natixis spokesperson said "we are always actively managing our positions on transactions, either via the coordinated syndication process or through secondary sales afterwards."

Related Digital nears $16 billion financing for Oracle data center: Report - The Economic Times

Data center developer Related Digital is closing in on $16 billion of financing for a giant Oracle data center following months of negotiations with investors, Bloomberg News reported on Wednesday. Related Digital has been rounding up ⁠cash ⁠to build a campus in Michigan's Saline Township that would allow Oracle to power applications for OpenAI, according to the report. The financing is expected to be finalized as soon as this month. Big Tech companies have been pouring billions into building AI ⁠infrastructure, driven by the pursuit of technology capable of matching or surpassing human intelligence. Blackstone's ⁠equity contribution is projected to be lower than expected at nearly $2 billion, amounting to about half of what was initially under consideration, the report said. Bank of America is leading an additional $14 billion indebt financing that was originally intended as a construction loan but is now expected to be structured as a bond offering, according to Bloomberg. Related Digital, Oracle, Blackstone and BofA ⁠did notimmediately respond to Reuters' requests for comment. OpenAI, Oracle and Related Digital in October announced that they are building a data center campus of more than 1 gigawatt in Saline Township as part of their Stargate push to expand U.S. AI infrastructure capacity.

Related Digital nears $16 billion financing for Oracle data center, Bloomberg News reports

April 1 (Reuters) - Data center developer Related Digital is closing in on $16 billion of financing for a giant Oracle data center following months of negotiations with investors, Bloomberg News reported on Wednesday. * Related Digital has been rounding up cash to build acampus in Michigan's Saline Township that would allow Oracle topower applications for OpenAI, according to the report. Thefinancing is expected to be finalized as soon as this month. * Big Tech companies have been pouring billions intobuilding AI infrastructure, driven by the pursuit of technologycapable of matching or surpassing human intelligence. * Blackstone's equity contribution is projected to be lowerthan expected at nearly $2 billion, amounting to about half ofwhat was initially under consideration, the report said. * Bank of America is leading an additional $14 billion indebt financing that was originally intended as a constructionloan but is now expected to be structured as a bond offering,according to Bloomberg. * "We are proud of the rapid progress that's been made bothin financing and developing our data center in Saline Township,Michigan," an Oracle spokesperson said in a statement. * Oracle has hit a major milestone with the verticalconstruction of the campus now underway, the spokesperson said,adding that the effort is moving forward on time and accordingto plan. * Related Digital, Blackstone and BofA did not immediatelyrespond to Reuters' requests for comment. * OpenAI, Oracle and Related Digital in October announcedthat they are building a data center campus of more than 1gigawatt in Saline Township as part of their Stargate push toexpand U.S. AI infrastructure capacity. (Reporting by Juby Babu in Mexico City; Editing by Maju Samuel)