Oracle sued by bondholders over losses tied to AI buildout

NEW YORK, Jan 14 (Reuters) - Oracle ORCL.N was sued on Wednesday by bondholders who say they suffered losses because the company chaired by billionaire Larry Ellison failed to disclose it needed to sell significant additional debt to build out its artificial intelligence infrastructure.

The proposed class action was filed in a New York state court in Manhattan on behalf of investors who bought $18 billion of notes and bonds that Oracle issued on Sept. 25, two weeks after Oracle announced a $300 billion, five-year contract to supply OpenAI with computing power.

These investors said they were blindsided when Oracle returned to the capital markets seven weeks later to obtain $38 billion of loans to fund two data centers to support the OpenAI agreement .

"The bond market's reaction to Oracle's additional debt was swift and bracing," as prices fell and yields rose on Oracle's debt because investors perceived higher credit risk, the bondholders said.

According to the complaint, Oracle, Ellison, former Chief Executive Safra Catz, Chief Accounting Officer Maria Smith, and the company's underwriters are strictly liable under federal securities laws for false and misleading statements in offering documents for the $18 billion debt sale. The bondholders are seeking unspecified damages.

Oracle did not immediately respond to a request for comment.