Oracle's credit default swaps just hit levels you normally see in junk bonds. The cost to insure their debt against default is up almost 300% in a year, and their bonds are trading like the company is already in trouble, even though the official rating is still barely investment grade. The reason is simple. They're spending close to $100 billion a year building data centers, and operating cash flow doesn't come close to covering it. Free cash flow is deeply negative. Total debt is approaching $160 billion. If they get downgraded to junk, funds that can only hold investment-grade debt are forced to sell. One rating cut and the selling pressure gets mechanical, not emotional. The stock is already down 35% this year, and the bond market is screaming louder than the equity market. I hold a small position and I'm not adding.
There are no replies in this thread yet. Be the first to post a reply below: