Max Frumes

William Hoffman

Laurie Tomassian

Don’t miss out on news you won’t find anywhere else — get The Memo US and The Memo Europe in your inbox every two weeks.

Being economical with the truth while selling dreams of the future is more commonly associated with startup meltdowns than with investment grade debt. Oracle is not a startup, but a new lawsuit by a group of bondholders accuses the tech giant of doing something similar.

The cloud computing company has been hit with a securities class action lawsuit tied to its $18bn investment grade bond sale last year, as investors scrutinize one of the largest tech debt deals to emerge amid a historic wave of US IG issuance.

The complaint, filed on 14 January in New York state court led by Ohio Carpenters’ Pension Plan, alleges that Oracle and a syndicate of underwriting banks made false and materially misleading statements and omissions in connection with a September 2025 multi-tranche senior note offering used to fund AI infrastructure, according to the filing.

The lawsuit centers on six tranches of senior unsecured notes, totaling $18bn, issued via Oracle’s shelf registration and priced on 25 September 2025. The deal, led by Bank of America, JP Morgan, HSBC and Deutsche Bank, included $3bn of 4.45% notes due 2030, $3bn of 4.8% notes due 2032, $4bn of 5.2% notes due 2035, $2.5bn of 5.875% notes due 2045, $3.5bn of 5.95% notes due 2055 and $2bn of 6.1% notes due 2065, according to the complaint.

The 5.875% notes due 2045 are down 10 points since issuance to around 90.7 cents, according to 9fin data. On a spread basis, the notes have shot up to T+202bps after being priced at T+115bps.

Plaintiffs allege the offering documents failed to disclose or adequately warn investors that Oracle would need to raise substantially more debt to fund its AI buildout linked to a landmark cloud computing agreement with OpenAI, announced earlier in September 2025. That contract is valued at $300bn, spans five years and roughly 4.5GW of data center capacity annually, the filing said.

Just seven weeks after the bond sale, reports emerged that Oracle was seeking up to $38bn of additional debt financing — including two large term loans — to support the same AI infrastructure program, according to the complaint. The suit claims that news triggered a sharp repricing of the September bonds, with yields and spreads widening to levels more typical of lower-rated issuers, causing losses for investors.

Sources speaking to 9fin were skeptical the claims would hold given the extent of company and news reports swirling last year about how much debt would be needed to build the future of AI.

“I don't see how the investors have a leg to stand on,” one banker away from the deal said. “There’s always a plan to come back to the market and it may not be for the scope or timing that was involved in the Oracle trade, but there's all these expectations that there's going to be future funding.”

The additional debt financing also came just as attitudes around AI spending were starting to boil over.

Debt from other hyperscalers sold off during this period amid concerns that tech companies were spending more than they could expect to profit in the long run. But Oracle certainly took the brunt of the sell-off as the only triple-B rated company to issue this much debt compared to the double-A rated balance sheets of its competitors.

Oracle, Meta, Alphabet and Amazon collectively priced around $113bn of US IG bonds in 2025, as capital spending on data centers and AI infrastructure accelerated, according to 9fin. That figure includes about $31bn of debt Blue Owl Capital sold to investors with the backing of Meta’s data centers — a deal that has drawn comparisons to Oracle’s $38bn private debt financing.

This borrowing helped drive gross US IG issuance to about $1.6trn in 2025, the second-highest annual total ever, as 9fin has reported. The trend is expected to continue. Street estimates cited by 9fin put potential US IG gross issuance in 2026 at $1.8trn–$2.2trn, with tech capex a key swing factor.

Oracle, its senior executives — including Lawrence Ellison and Safra Catz — and a broad group of underwriters, including BofA Securities, Citigroup, Goldman Sachs, JP Morgan, Deutsche Bank, HSBC and others, are named as defendants in the suit.

Bank of America, JP Morgan and Deutsche Bank declined to comment. Oracle and HSBC did not respond to a requests for comment.

🍪 Our Cookies

Oracle lawsuit highlights risks of building for the AI boom

Read all our public content for free

Recently Published

European private credit league tables Q4 25

Excess Spread — Muffins, Dog days

Sign up to 9fin’s credit webinar series

Oracle lawsuit highlights risks of building for the AI boom

What are you waiting for?