Morgan Stanley: Oracle’s 20 billion dollar financing takes shape, but debt pressures remain

What does the 20 billion dollar financing address?

Oracle plans to raise financing through a 10 billion dollar bond transaction and a 10 billion dollar stock offering. The size is consistent with the plan announced at its analyst day, but the financing is coming earlier than Morgan Stanley expected and differs from the company’s guidance in February that it would issue no more bonds in calendar year 2026.
The company’s message that it would pause after the 20 billion dollars leads Morgan Stanley to expect its debt in the US investment-grade bond index to exceed 125 billion dollars, while remaining well below bank levels. The bank welcomes the greater clarity on the scope of financing but believes the transaction has not eliminated credit concerns.

The 20 billion dollar financing figure excludes refinancing. Oracle has 5 billion, 4.75 billion and 6.25 billion dollars of bonds maturing in calendar years 2027, 2028 and 2029, respectively; the figure for 2029 excludes a newly issued 2 billion dollar bond due in November 2029.
In addition, approximately 5 billion dollars of extendable Oracle term loans mature in August 2027; approximately 2 billion dollars of construction loans for Abilene Phase I mature in January 2028, with two one-year extension options.

Based on its analysis of Oracle’s cash flows and funding, Morgan Stanley believes tens of billions of dollars in five-year supplier financing could arise in the future. The bank expects such financing to be less transparent and says Moody’s has identified it as debt-like.
A new Amazon financing arrangement of up to 80 billion dollars involves security interests in some purchased assets, and principal repayments are excluded from free cash flow. Morgan Stanley notes that if Oracle adopts a similar structure, the associated claims could rank ahead of unsecured claims.
The bank is therefore focused on the priority debt threshold of approximately 20%: this ratio could affect whether the unsecured debt rating can remain aligned with the corporate family rating. Supplier financing and growing lease liabilities would also keep leverage high.

The new transaction did not include 30-year bonds, in line with Morgan Stanley’s expectations. The spread between Oracle’s 10-year and 30-year bonds has narrowed significantly in recent weeks, falling below 30 basis points on the day of the report; the bank believes 30 basis points could form a near-term floor.
Less additional public bond issuance related to AI infrastructure is favorable for bond supply; however, refinancing remains outside the 20 billion dollar plan, and the broader AI supply chain is expected to face a busy week of bond issuance. Morgan Stanley maintains a cautious medium-term view, although improved compensation for bondholders’ risk has made it somewhat less cautious.