Blue Owl, the largest data centre partner of Oracle will not sign a $10bn deal for its next facility as the software firm faces increased risk of debt rising and AI spending.
Blue owl is in talks with Oracle and some lenders, planning to invest in the planned 1 gigawatt data centre being built to serve OpenAI in Saline Township, Michigan.
But the agreement will not go forward after negotiations stalled, according to three people familiar with the matter.
Investing in a software firm which is already under debt will pose a threat to Blue Owl. Blue Owl typically sets up a special purpose vehicle, which owns the data centre and leases it to Oracle.
The breakdown of funding discussions with Blue Owl leaves the financing of the Michigan facility in doubt, as Oracle has not yet signed a deal with a new backer, according to the people close to the matter.
Blue Owl’s role would probably have involved arranging up to $10bn of financing and making a large equity investment.
The group, founded by Ellison, has embarked on an AI data centre spending spree in recent months and has aggressively tapped debt markets to build its capacity, spooking investors and prompting concern from rating agencies and analysts.
People close to the Michigan deal said lenders pushed for stricter leasing and debt terms amid shifting market sentiment around enormous AI spending including Oracle’s own commitments and rising debt levels.
As a result, the deal was less attractive financially for Blue Owl than its earlier projects, according to some of the people.
Oracle said: “Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl . . . Final negotiations for their equity deal are moving forward on schedule and according to plan.”
