Oracle bondholders sue over AI-driven debt surge tied to OpenAI project
Oracle is facing a class action from bondholders who say the company hid plans to load up on new debt shortly after a large offering. The additional borrowing was used to finance data centers tied to a multiyear compute deal with OpenAI, and the market response hit both bonds and shares.
The suit was filed in New York State Court in Manhattan. Oracle declined to comment.
What triggered the lawsuit
Investors bought roughly $18 billion of Oracle bonds and notes on September 25, 2025. That sale followed an announcement of a five-year, $300 billion agreement to supply computing power to OpenAI.
Seven weeks later, Oracle tapped the market again-this time raising $38 billion in loans to fund two data centers connected to the OpenAI agreement. Bondholders argue they were blindsided by the scale and speed of the added leverage.
Market reaction and credit implications
According to the complaint, the reaction was swift. Prices on the earlier bonds dropped, while yields and spreads widened to levels seen in lower-rated issuers, reflecting higher perceived credit risk.
Court filings note the bonds carried low investment-grade ratings at issuance. Investors say the prospectus language stating Oracle "may" seek additional borrowing was misleading because the company had already planned to take on more debt.
Who is being sued
The case is led by the Ohio Carpenters' Pension Fund on behalf of a wider investor group. Defendants include Oracle founder Larry Ellison, Safra Catz, chief accountant Maria Smith, and 16 underwriting banks.
The plaintiffs seek unspecified damages under the US Securities Act of 1933. For reference, see the overview of the law at Cornell Law.
Key dates and figures
- Sept 25, 2025: ~$18B Oracle bond and note sale
- Five-year, $300B compute agreement with OpenAI (announced two weeks before the bond sale)
- Seven weeks later: $38B in new loans to fund two data centers for the OpenAI deal
- End of November: total bonds and other borrowings at ~ $108B
Why this matters for fixed-income desks
Leverage trajectories tied to AI infrastructure can shift quickly and materially change spread risk. Prospectus qualifiers ("may," "could," "expect") deserve extra scrutiny when capex needs are tied to large compute contracts.
- Re-underwrite leverage and FCF sensitivity with capex front-loaded for data center buildouts.
- Track ratings watch/Outlook changes and implied spread moves across the curve.
- Stress test for further issuance and covenant headroom; consider CDS hedges where liquidity allows.
- Monitor disclosure cadence and any updates via SEC EDGAR (Oracle).
What to watch next
- Court timelines and any amendments to claims under the Securities Act.
- Potential revisions to capex plans, JV structures, or off-balance-sheet financing for data centers.
- Spread behavior on legacy tranches versus new borrowings and any rating agency commentary.
Published: 15.01.2026
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