Broadcom Inc. (AVGO.US) guarantees to provide "escort" for Anthropic's $3.6 billion financing: the core portion interest rate is only about 5.75%, which is far below the level of conventional risk debt.

According to sources familiar with the matter, thanks to Broadcom Inc.'s commitment to provide guarantees for the largest portion of the record-breaking chip financing deal, Anthropic was able to maintain a lower financing cost for the $36 billion transaction. Sources say that the arranging parties of the deal - Apollo Global Management Inc. and Blackstone Inc. - are currently discussing a yield level of about 5.75% with investors for the largest portion of the debt, which is around $25 billion. Sources also mention that the other portion of financing, which is riskier and not supported by Broadcom Inc., could have interest rates between 8% and 9%. Although this deal is of an extremely large scale and not common in structure, the yield range being discussed for the core financing part is similar to some data center financing transactions earlier this year. The risk premium may even be lower compared to levels seen in late April for a data center investment-grade bond issuance in Louisiana supported by Alphabet Inc. Class C. However, given the uniqueness of the Broadcom Inc. deal itself, direct comparisons still pose some difficulty. According to reports at the end of last month, Apollo Global Management Inc. and Blackstone Inc. jointly raised about $36 billion in debt financing for Anthropic to support its large-scale purchase of Alphabet Inc. Class C custom AI chips - Tensor Processing Units (TPUs) - which will be leased by Anthropic. Broadcom Inc., assisting Alphabet Inc. Class C in developing the chips, will guarantee most of the payment for this transaction. The deal is expected to become one of the largest private credit transactions in history and the largest chip financing debt deal so far. As tech companies continue to invest heavily in AI data centers and computational facilities, the high cost of chips has given rise to a large-scale GPU and specialized chip financing market. Companies like data center operator CoreWeave have already used GPU collateralized loans to secure financing, and this deal will extend the same logic to the Alphabet Inc. Class C TPU domain. This financing solution will use a Special Purpose Vehicle (SPV) structure: the SPV will borrow funds and receive equity investments to purchase TPU chips, which will then be leased to Anthropic. Debt repayment will mainly rely on lease payments and the long-term residual value of the chips. Anthropic plans to deploy the chips in factories in New York, Texas, Louisiana, and Indiana. Given that Anthropic, as a startup company, does not have sufficient cash flow to support such a large-scale debt, the core of the deal relies on Broadcom Inc.'s strong credit standing. Broadcom Inc. has provided a "residual value support" agreement in the transaction: if Anthropic fails to pay rent on time, the SPV will sell the chips to repay the debt; if the value of the chips is not enough to cover the debt, Broadcom Inc. will compensate 100% of the difference to priority A1 and A2 bondholders. This aligns the credit ratings of the A1 and A2 bonds with Broadcom Inc.'s investment-grade rating, while Broadcom Inc.'s own ratings and balance sheet will not be directly impacted by the transaction. By leveraging its top credit rating to support the largest portion of the deal, Broadcom Inc. has effectively helped investors gain confidence in providing a huge loan to a young startup like Anthropic - even as the company faces fierce market competition. This financing arrangement will help Anthropic achieve its ambitious goal of significantly expanding its computing power to cope with the increased demand from customers - its existing computing resources are close to their limits. At the same time, as the deal progresses towards an initial public offering (IPO) competition with OpenAI, it is expected to further strengthen Anthropic's competitive position. It was reported that on June 1, local time, Anthropic announced on its official website that the company had secretly filed IPO application materials. In a brief announcement, Anthropic stated that it had submitted IPO application materials to the U.S. Securities and Exchange Commission, and once the agency completes its review, the company can proceed with the listing. Whether this IPO will be successful depends on market conditions and other relevant factors. The number of shares and offering price for this IPO have not yet been determined. Secretly filing for an IPO is a practice in the U.S. stock market - after submitting the materials, the SEC conducts a closed-door review before publicly releasing the full prospectus close to the official listing date. The benefit of this practice is that if the final listing plan is terminated, the company will not have disclosed a large amount of internal information. Currently, OpenAI has not disclosed any news about submitting IPO application materials. Since the beginning of the year, Anthropic has completed at least two rounds of large-scale financing. On May 28, Anthropic announced that it had completed a Series H round of $65 billion financing at a post-investment valuation of $96.5 billion. At this disclosed post-investment valuation, Anthropic has surpassed the $85.2 billion valuation disclosed by OpenAI in March, becoming the highest valued AI startup company currently. The $96.5 billion valuation is more than double the previous valuation for Anthropic. According to data from financial information website PitchBook, the rate of valuation increase for Anthropic has set a record as the fastest in the history of venture capital. PitchBook data also shows that Anthropic reached this latest valuation about 3 years and 2 months after launching its first product.