Investors Demand High Rates to Buy New Oracle Bonds

Dow Jones04:13

Oracle is being forced to pay up to complete its latest bond sale-the last that it plans to do over the next few years to fund new projects rather than just repay old debt.

Oracle's $10 billion issuance includes a $1.75 billion of new five year bonds, which will carry an initial extra yield, or spread, over Treasurys of 2.75 percentage points, according to investors.

That was comfortably above the spread of its existing 5-year bonds and larger than the roughly 2.3 percentage point spread investors could get on average from double-B rated bonds with similar maturities as of Friday, according to Bloomberg data. Oracle still has triple-B ratings from the major ratings firms, at the bottom tier of investment-grade territory.

Oracle also announced on Monday that it was issuing $10 billion in common stock. The company, which is spending heavily on AI infrastructure, said last week that it wouldn't raise more than $20 billion in additional funding in capital markets through fiscal 2030. It is expected to keep issuing bonds for refinancing purposes.

Its shares were down nearly 9% in recent trading.

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