Oracle's credit default swaps are plummeting as financing plan boosts investor confidence

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Oracle’s

5-year credit default swaps tumbled 17% after the software vendor’s plan to raise $50 billion in debt and equity bolstered investor confidence that the company will be able to avoid a credit downgrade as it funds its artificial intelligence buildout.

“Equity financing significantly inhibits the downside for credit,” Andrew Keches, a credit analyst at Barclays, wrote in a note to clients on Monday. Keches upgraded Oracle’s debt to overweight and said that its CDS should compress further.

Credit default swaps are like insurance for investors, with buyers paying for protection in case the borrower can’t repay its debt.