--- title: "Oracle's filing shows $288 billion off-balance-sheet leases as S&P sees no disconnect and CDS hits 295" description: "The rating agency says it cannot see all the AI debt and sees no need to act. Oracle's quarterly filing puts a number on the unseen part, and the market's price for Oracle default keeps setting records." publisher: "The Inference" section: "Data Center" published: 2026-10-21T17:12:11.434Z modified: 2026-10-21T17:12:11.434Z canonical: https://theinference.org/article/oracle-s-filing-shows-288-billion-off-balance-sheet-leases-as-s-p-sees-no-disconnect-and-cds-hits-295 language: en keywords: "Oracle, AI Debt, Credit, Bonds, Ratings" --- # Oracle's filing shows $288 billion off-balance-sheet leases as S&P sees no disconnect and CDS hits 295 > The rating agency says it cannot see all the AI debt and sees no need to act. Oracle's quarterly filing puts a number on the unseen part, and the market's price for Oracle default keeps setting records. [Oracle](https://theinference.org/markets/companies/oracle)'s quarterly filing just put a number on the AI debt [S&P Global Ratings](https://theinference.org/markets/companies/s-p-global-ratings) says it cannot see. The company [disclosed $288 billion of additional lease commitments](https://econotimes.com/Oracle-s-Credit-Default-Swap-Quote-Reaches-295-Basis-Points-Amid-AI-Buildout-1756981), 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](https://www.globalbankingandfinance.com/top-hyperscalers-likely-ai-linked-debt-known-p-global-warns/), 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](https://theinference.org/article/s-p-lifts-sandisk-and-kioxia-to-bbb-as-oracle-sits-one-notch-above-junk-on-a-42-billion-cash-deficit), and holds it there [1][3]. 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](https://theinference.org/markets/companies/moody-s), 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](https://theinference.org/article/traders-put-a-one-in-five-chance-on-oracle-defaulting-within-five-years), hit 261 basis points, then 288, then 295 this month [1][3][4]. 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](https://theinference.org/markets/companies/s-and-p-global) Market Intelligence's own fixed income desk [prices the credit "in line with BB and B credit, which is high yield"](https://invedeck.com/en/learn/media/2026-10-15-oracle-ai-credit-stress-cds/) [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. *Chart: **Oracle default insurance has set three records this month, reaching 295 basis points** Oracle five-year credit default swap spread at each record print this month, in basis points.* *Oracle five-year credit default swap spreads at successive record prints in October 2026, basis points. Sources: The Inference; InveDeck; EconoTimes. [3][4][1]* ## 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 [OpenAI](https://theinference.org/markets/companies/openai), which lost $38.5 billion in 2025 and starts paying about $60 billion a year only in 2027 [3]. *Chart: **Capex has outrun Oracle's operating cash flow every quarter since Q2 2025, in US$ billions** Oracle quarterly capital expenditure and operating cash flow, fiscal Q2 2025 through Q3 2026, US$ billions.* *Oracle quarterly capital expenditure versus operating cash flow, US$ billions, fiscal Q2 2025 to Q3 2026, per Oracle's filings as tabulated in our October 15 report. [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 [1][3]. 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 [1][3]. If it does not, the question stops being what S&P can see and becomes which holders are forced sellers. ## Takeaway S&P holds Oracle one notch above junk and sees no disconnect; the filing shows $288 billion of leases off balance sheet, and the five-year default swap prints a record 295 basis points. ## Sources 1. [EconoTimes, Oracle's Credit Default Swap Quote Reaches 295 Basis Points Amid AI Buildout, 21 October 2026](https://econotimes.com/Oracle-s-Credit-Default-Swap-Quote-Reaches-295-Basis-Points-Amid-AI-Buildout-1756981) 2. [Reuters via Global Banking & Finance Review, Top hyperscalers likely to have more AI-linked debt than now known, S&P Global warns, 19 October 2026](https://www.globalbankingandfinance.com/top-hyperscalers-likely-ai-linked-debt-known-p-global-warns/) 3. [The Inference, S&P lifts SanDisk and Kioxia to BBB as Oracle sits one notch above junk on a $42 billion cash deficit, 15 October 2026](https://theinference.org/article/s-p-lifts-sandisk-and-kioxia-to-bbb-as-oracle-sits-one-notch-above-junk-on-a-42-billion-cash-deficit) 4. [InveDeck, Oracle Five-Year CDS Hits Record 288 Bps, Flagging Credit Costs Behind AI Data-Center Capex, 15 October 2026](https://invedeck.com/en/learn/media/2026-10-15-oracle-ai-credit-stress-cds/) --- Oracle's filing shows $288 billion off-balance-sheet leases as S&P sees no disconnect and CDS hits 295 — The Inference. Canonical: https://theinference.org/article/oracle-s-filing-shows-288-billion-off-balance-sheet-leases-as-s-p-sees-no-disconnect-and-cds-hits-295