Oracle’s New Mexico Data Center Doesn’t Have Its Power Yet, but the Rent Is Owed and a Lender Sold Below 90 Cents

Out in Doña Ana County, New Mexico, there’s a data center that doesn’t have its power yet and already has rent coming due. Oracle (ORCL) signed up for the campus — Project Jupiter — last year, one of a string of leases it rushed into so it could deliver computing power to OpenAI, and the terms are what the trade calls hell-or-high-water: no exit clause, and the rent is owed with or without the power to run the place, the Journal reports. The permits haven’t come. This past week Oracle reached for the lever the lease does give it.

That lever is a force majeure notice to Stack Infrastructure, the developer, which Blue Owl Capital (OWL) funds own. It delays the day full rent starts — the lease permits as much as three years of that — without shrinking the bill, because every month deferred is added to the back end of the lease and the total owed doesn’t fall. Oracle says such notices are commonplace and the project is on schedule; Blue Owl says the parties are aligned and the commitments unchanged. The trouble underneath is prosaic: Oracle still lacks state air permits after reworking a power plan built on gas turbines and diesel generators, a piece of a proposed 17-mile gas pipeline has been rejected twice, and Oracle recently dropped a land-and-power partner, BorderPlex Digital Assets.

Follow the money, then the rating

About a year ago OpenAI agreed to buy $300 billion of Oracle cloud computing over five years, and Oracle leased mega-sites in four states, around 4.5 gigawatts, to deliver it. For New Mexico, about 20 banks put up $18 billion in construction loans and Blue Owl funds about $3 billion of equity; Stack earns Blue Owl the equivalent of 9% annualized, with reserves for up to three years of delay, after which the forecast return rises to 11%. At least one bank has sold part of the New Mexico debt below 90 cents on the dollar; at that price the original lenders are sitting on a paper loss of at least $1.8 billion — paper, because most banks carry construction loans at cost until they come due. And in July S&P Global Ratings cut Oracle to one notch above junk, saying its “rapidly expanding AI infrastructure business is increasing its overall credit risk.”

Our read

The AI build-out is being financed like commercial real estate — unbreakable leases, construction loans, sponsor equity, a promised tenant — and real estate is where credit stories live, which makes this Fixed Income (IN02) first. One notch above junk is still investment grade, so Oracle’s bonds can still sit in the bond funds people own for safety; a cut into junk could push them toward a different kind of buyer. Oracle is held at weight in the desk’s growth and AI books; nothing’s been added to it, and the credit story is the thing to watch. The stock closed Friday at $137.10, down 29.66% this year by the Journal’s tables: the market asking the lenders’ question.

The practical check is Investments/Risk (IN04) housekeeping: what your bond funds actually hold at the bottom of investment grade, and how much of your equity index sits in the handful of companies writing the biggest capex checks — often more than you’d guess. With the 10-year Treasury at 5.17%, its highest close since 2007, borrowed money to build isn’t cheap. Fifteen minutes with the holdings list is the whole exercise.