A week after the notice on Project Jupiter, the debt behind the New Mexico data center has traded below 90 cents on the dollar, according to people familiar with the trades. The open question is who absorbs a delay.
A clause that excuses a party when events outside its control intervene is now at the center of a privately financed AI campus backed by about $18 billion of bank commitments.
Oracle on Sept. 24 issued a force majeure notice to Blue Owl Capital and STACK Infrastructure on Project Jupiter, a data-center campus of about 2.4 gigawatts in New Mexico that Oracle leases. The notice related to delays in power, according to a person familiar with the matter.
Both sides moved quickly to calm investors. Blue Owl and STACK said they "remain fully aligned" with Oracle. "This notice does not change the financial commitments," they said. Oracle said: "Project Jupiter remains on our planned schedule." Shares of Blue Owl and Oracle each fell about 3.5% that day.
The capital stack
Blue Owl has invested about $3 billion of equity in the project, according to a person familiar with the matter. It expected a yield of about 9% during development, rising to about 11% on a levered basis once the campus is complete, the same person said. A consortium of banks has committed about $18 billion of loans.
Pieces of that debt have traded below 90 cents on the dollar, according to people familiar with the trades. On an $18 billion commitment, each 10 cents of discount represents $1.8 billion of value.
The timing dispute
The parties do not agree in public on the schedule. A person familiar with the matter said the delay could run about a year. Oracle says the project is on its planned schedule. If a delay extended past 2028, rent payments could be pushed back by as much as three years.
Why the structure matters
Data centers like Jupiter are typically financed on the strength of a long lease to a creditworthy tenant. The sponsor's return steps up when the building is finished and rent begins. A force majeure clause shifts the cost of a delay away from the party that invokes it. Under that structure, a slip in power delivery lengthens the period in which equity earns its lower development yield and lenders wait for the lease payments that support their loans.
Lenders are now "increasingly focused on how risk is allocated" in these deals, one adviser said.
Two readings
One reading is that this is a contract working as written. The tenant used a standard protection, the sponsor and lender commitments stand, and a power delay of uncertain length is a timing issue on a project whose long-term demand neither side disputes.
A second reading is that Jupiter shows where the risk in privately financed AI campuses sits. If a hyperscale tenant can push back rent through force majeure, the yield promised to equity and the cash flow backing bank loans are less fixed than their structure suggests, and debt trading below 90 is the market pricing that.
The next evidence
Any disclosure of the revised completion date, a change to lease terms or lender reporting on the loans would show which reading holds. Blue Owl's next quarterly report is the first place the company would have to describe the project's status to its own investors.