Bondholders sue Oracle over losses tied to AI buildout

Bondholders sue Oracle over losses tied to AI buildout

Bondholders sued Oracle claiming the company chaired by Larry Ellison failed to reveal that it needed to sell considerable additional debt to build out its artificial intelligence structure

On behalf of investors who bought $18 billion of notes and bonds issued by Oracle on Sept. 25 two weeks after Oracle announced a $300 billion, five-year contract to supply OpenAI with computing power, the proposed class action was filed in a New York state court in Manhattan.

According to the investors, they were blindsided when Oracle returned to the capital markets seven weeks later to obtain $38 billion of loans to fund two data centers to support the OpenAI agreement.

The bondholders reportedly said, "The bond market's reaction to Oracle's additional debt was swift and bracing" as their own debt fell in value and began trading at yields and spreads comparable to debt from lower-rated companies due to the perceived higher credit risk. Notes and bonds of Oracle carried low investment grades.

While Oracle refused to comment, lawyers for the bondholders did not immediately respond to requests for comment.