Banks begin selling record $60B Anthropic chip debt

Wall Street banks began selling off pieces of a $60 billion debt package on Monday, Oct. 5. The money will pay for Anthropic's lease of Google-designed chips. The Financial Times reported that it is the largest chip-financing deal to date, and it will show how much appetite lenders have for the costly buildout of artificial intelligence infrastructure.finance.yahoo+1

Bank of America ↗ 0.17%, Citigroup ↘ 0.02% and Morgan Stanley ↗ 0.44% have committed to fund the deal and are now offering parts of it to other lenders, according to the FT report. The first portion to be sold is about $42 billion of senior secured loans backed by Broadcom ↗ 3.67%. Because Broadcom has an A-minus credit rating, the debt could later be sold more widely through private placements or the investment-grade bond market.news.futunn+1

A junior tranche tied to Anthropic's IPO

The same banks plan to sell another $18 billion of junior debt later, and Broadcom will not guarantee it. Blackstone ↗ 1.53% has already committed about $9 billion to that tranche and is helping to sell the rest. Buyers of the junior debt would take on Anthropic's credit risk directly. For that reason, the banks may wait to approach the wider market until after Anthropic's planned initial public offering later this year, when its financial disclosures will be public. The money will pay for chips Anthropic has ordered for delivery in 2027, and lease payments will not begin until the hardware arrives.tradersunion+1

Broadcom shares rose in Tuesday trading. BofA Securities analyst Tom Curcuruto estimates that Broadcom's AI financing vehicle could support about $370 billion of senior debt by mid-2029. He also said the company's initial transaction leaves it exposed to as much as $29 billion.benzinga

Supplier, lender and potential shareholder

Reuters, citing Anthropic's IPO prospectus, reported that Broadcom has agreed to lend the company up to $42 billion for infrastructure spending. The loans would take the form of convertible notes that could become Anthropic shares, and Anthropic does not expect to sell any of them before its IPO. The notes could cover about one-third of Anthropic's $125.2 billion, five-year commitment to lease tensor processing unit (TPU) capacity.entarabi+1

In the prospectus, Anthropic said that Broadcom's dual role as hardware supplier and lender creates potential conflicts of interest. It also said certain defaults could make a large share of its lease obligations due immediately, while at the same time limiting its ability to draw on the $42 billion facility. Anthropic is expected to be Broadcom's largest compute customer in 2027. Broadcom forecasts about $115 billion in AI semiconductor revenue that year.varindia

Some analysts see the arrangement as an example of circular financing, in which a supplier lends money to a customer that then buys the supplier's products. "Nvidia is putting in place a massive amount of its balance sheet, and Broadcom is having to follow suit," said Jay Goldberg of Seaport Research. Robert Leitao, a managing partner at Rothschild & Co, put the risk this way:varindia

> "It feels that there's quite a concentrated bet right now on two companies being able to generate enough revenues to support all the financing."varindia