Oracle's filing shows $288 billion off-balance-sheet leases as S&P sees no disconnect and CDS hits 295

Oracle's▼−1.57% — Oracle, down 1.57 percent today quarterly filing just put a number on the AI debt S&P Global RatingsPVT$123B — S&P Global Ratings, private, latest valuation $123B says it cannot see. The company disclosed $288 billion of additional lease commitments↗, substantially all data centers, sitting outside its balance sheet ¹. Days earlier, S&P's global head of digital infrastructure said it is "safe to assume" the biggest tech firms carry more AI-linked debt than disclosed↗, while insisting no rating change is needed ².

Meanwhile Oracle's default insurance keeps printing records: 295 basis points on October 19, the third this month ¹. The agency's rating desk sees no disconnect; its own data terminal shows the market treating Oracle as high yield, and the parties exposed to the gap are Oracle's bondholders.

The notch is the product

S&P cut Oracle to BBB-, one notch above junk, on July 9, and holds it there ¹³. That notch is infrastructure, not commentary. Roughly $120 billion of Oracle bonds sit in investment-grade indexes, and one more cut to BB+ would force funds restricted to investment-grade paper to sell them ³. Deutsche Bank strategist Jim Reid warned of exactly that forced-selling dynamic; Oracle told CNBC that maintaining its investment-grade rating is its "first priority" ¹. Moody's·+1.20% — Moody's, up 1.20 percent as of its last quote, the rival rater, carries Oracle on negative outlook ³.

The market disagrees with the desk

Oracle's five-year credit default swap, the insurance against default, hit 261 basis points, then 288, then 295 this month ¹³⁴. We reported the 261 basis point record on October 15 and the 288 print the same week; the 295 is new since then ⁴. S&P Global·+1.05% — S&P Global, up 1.05 percent as of its last quote Market Intelligence's own fixed income desk prices the credit "in line with BB and B credit, which is high yield"↗ ⁴.

Yet the ratings side of the same company told investors this week it sees no "major disconnect" requiring action, because its scores take a long-term view ². One or the other description of Oracle's credit is wrong for someone's portfolio.

The filing answers the visibility question

S&P's Mark Habib said unseen liabilities may sit in unrated structures, where his agency might "not have the visibility" ². Oracle's filing gives a partial answer: the $288 billion of off-balance-sheet lease commitments start paying out between fiscal Q2 2027 and fiscal 2029 ¹.

S&P models Oracle's fiscal 2027 free cash flow deficit at $42 billion, after a burn of nearly $24 billion in fiscal 2026, having raised its capex forecast almost 60% to $95 billion after talks with management ³. The backlog Oracle borrows against is $664 billion of contracted revenue, roughly 45 percent of it OpenAIPVT$1.18T — OpenAI, private, latest valuation $1.18T, which lost $38.5 billion in 2025 and starts paying about $60 billion a year only in 2027 ³.

Who carries this

The arrangement moves risk to the party least able to exit: index-constrained bondholders must hold what the rating calls safe, and a sale is forced on them only after the notch moves ¹³. The stress is spreading beyond one issuer; SoftBank's five-year swap reached 432 basis points this week ¹.

Oracle's December 14 quarter, the second of its fiscal 2027, is the test of whether the $664 billion backlog converts on schedule ¹³. If it does not, the question stops being what S&P can see and becomes which holders are forced sellers.