UBS Group AG: Debt surge not a concern. Oracle Corporation (ORCL.US) unlikely to be downgraded from investment grade rating.

UBS Group AG stated that despite Oracle Corporation borrowing billions of dollars to expand its artificial intelligence business, the investment-grade rating of its bonds is likely to be maintained in the short term. UBS Group AG strategist Matthew Mish stated in an interview on Tuesday that the software giant's rating may be downgraded by one notch to the lowest tier of investment grade, but concerns in the market about it being downgraded to "junk" status are likely overblown. He added that investors have already absorbed most of the credit risk, and rating agencies are expected to maintain a "certain level of patience" with Oracle Corporation based on its business outlook. "We believe that being downgraded to junk in the first quarter is not the baseline scenario, in fact, the likelihood is very low," Mish said. Since Oracle Corporation issued $18 billion in bonds last September for data center expansion (aimed at seizing the AI investment boom), concerns about the sustainability of its rating have continued to grow. The risks posed by rising debt have prompted some investors to buy credit default swaps (CDS) related to Oracle Corporation, and by December of last year, the prices of some derivatives had risen to their highest levels since the global financial crisis. Currently, Oracle Corporation's outstanding debt is around $95 billion, making it the largest non-financial issuer in the Bloomberg High-Grade Corporate Bond Index. Mish emphasized that whether Oracle Corporation can maintain its investment-grade status will ultimately depend on the outlook of its AI business and its future borrowing plans. Currently, the three major rating agencies have assigned Oracle Corporation ratings two notches above junk status. Oracle Corporation declined to comment. The company's co-CEO, Safra Catz, stated explicitly during the earnings call last month that the company is committed to maintaining its high-rated debt status. Representatives from Moody's Corporation, S&P Global, Inc., and Fitch Ratings did not immediately respond to requests for comment.