Shares of Oracle Corp. fell 5% on Wednesday after a report in the Financial Times stated that a long-time partner in the buildout of the company’s data center ambitions, backed out of the $10 billion Michigan project.Oracle confirmed that Blue Owl Capital, a long-time partner and also involved in financing the $18 billion data center project in New Mexico, will not be contributing equity to the Michigan project, as it found the terms to be unsustainable.
Sources told Bloomberg that the Michigan project is progressing like others, even without the involvement of Blue Owl. Blackstone and Bank of America are in talks to be part of the equity contribution, sources added.
A spokesperson for Related Digital, the developer for the Michigan site, said the firm “selected our equity partner of choice for their unparalleled expertise in the space.” Full construction is expected to start in the first quarter.
Oracle shares fell 5% on Wednesday, triggering a steep sell-off in AI-linked names like Nvidia, Broadcom, CoreWeave and AMD, all of which fell between 4% to 8% overnight.Data center project financing packages are structured in a way that 80% of the financing is via debt and 20% via equity. The site is then owned by the developer and equity investor. This form of off-balance sheet fund raising is being used by Oracle to fund other sites.
Sources told Bloomberg that the Michigan project is progressing like others, even without the involvement of Blue Owl. Blackstone and Bank of America are in talks to be part of the equity contribution, sources added.
A spokesperson for Related Digital, the developer for the Michigan site, said the firm “selected our equity partner of choice for their unparalleled expertise in the space.” Full construction is expected to start in the first quarter.
Oracle shares fell 5% on Wednesday, triggering a steep sell-off in AI-linked names like Nvidia, Broadcom, CoreWeave and AMD, all of which fell between 4% to 8% overnight.Data center project financing packages are structured in a way that 80% of the financing is via debt and 20% via equity. The site is then owned by the developer and equity investor. This form of off-balance sheet fund raising is being used by Oracle to fund other sites.
A $38 billion package is leading the construction of projects in Wisconsin and Texas, while an $18 billion loan is funding the New Mexico site, where Blue Owl is providing the equity.
This may not be adding debt to Oracle’s balance sheet but is swelling its lease obligations. It already has commitments worth $248 billion as of the end of November. The cost of protecting Oracle’s debt against default using derivatives has risen to the highest since the global financial crisis of 2008.
With Inputs From Agencies.
