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Oracle Raises $15 Billion in Senior Notes

By Anders Bylund - Mar 23, 2021 at 2:24PM

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The database giant will use the funds for "general corporate purposes."

Database software titan Oracle (ORCL -1.01%) has picked up $15 billion of additional long-term debt. Oracle will settle the debt offering on Wednesday, March 24.

Oracle's debt offering by the numbers

The offering is underwritten by a group of five global money center banks. Upon closing, Oracle's total long-term debt will rise from $63.5 billion to $78.5 billion. The company's cash on hand will also jump from $22.3 billion to $37.3 billion. Oracle generated $12.1 billion of free cash flows over the last four quarters, to put these figures into perspective.

The additional debt is structured as six tranches of senior notes with due dates ranging from 2026 to 2061. The shortest-term papers come with an annual coupon rate of 1.65%, and the 2061 notes carry a 4.1% interest rate. The other tranches fall between these extremes.

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Image source: Getty Images.

These interest rates compare favorably to Oracle's existing long-term debt deals. The lowest rate among the 34 types of fixed and floating senior notes on Oracle's balance sheet for fiscal year 2020 was a 5-year note that falls due in September 2021 at a 1.9% annual coupon rate. The highest rate was 6.5% for a 30-year note due in 2038.

Oracle will use the proceeds from this offering for general corporate purposes. These purposes may involve paying down some of the higher-interest debt. Other options include financing Oracle's dividend policy, buying back shares, or funding acquisitions. In last week's third-quarter report and earnings call, Oracle's management didn't discuss their fundraising or capital management plans. The next report will show exactly how Oracle will allocate the $15 billion cash infusion.

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