(Bloomberg) — Apollo Global Management Inc. and Blackstone Inc. are working to bring additional investors into a roughly $36 billion debt financing deal to help Anthropic PBC build out its AI infrastructure.
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The debt will be used to purchase Google’s custom chips called TPUs, or tensor processing units, which Anthropic will then lease, according to people with knowledge of the matter. Broadcom Inc., which helps Google develop the chips, is backstopping payments on the largest portions of the transaction, said the people, who asked not to be identified because the information is private.
The move would mark one of the largest-ever private credit deals and also the biggest chip-financing debt transaction. It aims to tap Broadcom’s credit quality to provide computing-power access to Anthropic, which just eclipsed rival OpenAI in valuation.
Shares of Broadcom and Google owner Alphabet Inc. climbed in late trading on the news. Broadcom rose as much as 1.9% to an aftermarket high of $434.84, while Alphabet advanced as much as 1.2% to $394.81.
The financing plan will help the maker of Claude meet its ambitious goals for building infrastructure. The company is racing with OpenAI to line up an initial public offering later this year as investors throw vast sums of money at AI services.
Apollo’s quest for more chip-financing investors — what’s known as a debt syndication — is private, meaning it controls the invitations to potential backers. Apollo and Blackstone are planning to sell down some of the debt and keep significant portions for themselves, according to the people.
Investors are being asked to give their orders this week, and the deal is expected to wrap up next week, the people said. Still, discussions are ongoing and details could change.
Representatives for Apollo, Blackstone and Anthropic declined to comment. Representatives for Broadcom and Google didn’t immediately respond to requests for comment.
Anthropic announced Thursday that it raised $65 billion in a separate funding round that valued the company at $965 billion. It marked the first time that Anthropic had a bigger valuation than ChatGPT maker OpenAI.
GPU Loans
Tech companies are spending billions of dollars to construct AI data center facilities, but the bigger cost is typically the chips and other equipment needed to power the software and services. Though Nvidia Corp. dominates the market for this technology with its graphics processing units, or GPUs, it’s facing more competition. Google has emerged as a contender with its TPUs, and Broadcom and others are developing separate approaches.
The high cost of acquiring these chips has created a market for gigantic GPU loans, with data center operator CoreWeave Inc. and others taking advantage of the financing. The latest deal would apply the same concept to TPUs.
In this type of structure, a special-purpose vehicle, or SPV, borrows the money and also receives an equity investment. That cash is used to buy the chips, which are then leased to a customer. The debt is backed predominantly by the lease payments, along with the unknown long-term value of the chips.
In this case, Anthropic is planning to lease the chips to use at sites in New York, Texas, Louisiana and Indiana, one of the people said.
Because Anthropic is still a startup and lacks the earnings to support such a large debt deal, the financing relies on Broadcom’s strong credit profile. But the structure allows both companies to stay at arm’s length from the transaction.
The debt has a delayed-draw format, which means the money can be drawn down over a period of time as the chips become available and Anthropic’s leases begin, the people added.
Debt Tranches
The financing is taking the form of roughly $6 billion in A1 notes, $25 billion in A2 notes and $4.5 billion in B notes, the people said. Final amounts are in flux and could change, they added.
The A1 and A2 notes are senior in the debt structure, according to the people, meaning holders will get priority in repayment.
A key feature of the deal is Broadcom providing a “residual value support” agreement, the people said. That means that if Anthropic fails to make the lease payments for a certain period of time, the SPV will sell the chips to pay back the debt investors. If the value of the chips doesn’t make the debt investors whole, then Broadcom will make up the shortfall for 100% of the value owed to the A1 and A2 investors.
That puts the A1 and A2 notes’ credit profile in line with Broadcom, which has an investment-grade rating, the people added. This type of structure means that Broadcom’s own ratings and balance sheet shouldn’t be affected by the transaction.
Broadcom’s corporate bonds trade at a yield in the range of roughly 4% to 5%, depending on the maturity, according to Trace bond pricing data.
This type of residual value feature has been used in another mega debt deal, though it financed the construction of a data center rather than chips. Meta Platforms Inc. provided a similar protection for the value of its Hyperion facility in Louisiana. That allowed the so-called Beignet bonds to trade in line with Meta’s corporate debt.
–With assistance from Shirin Ghaffary, Emily Graffeo and Lynn Doan.
(Updates with Alphabet, Broadcom share reaction in fourth paragraph.)
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