Anthropic may struggle to secure an investment-grade credit rating immediately after its planned initial public offering, potentially increasing borrowing costs as the artificial intelligence company prepares for massive infrastructure spending.
Blackstone has told investors in Anthropic’s latest $63 billion chip financing deal that the AI company is likely to receive a high-yield, or junk, credit rating following its IPO, said a Financial Times report citing people familiar with the matter.
The assessment marks a shift from Blackstone’s earlier guidance that Anthropic could secure an investment-grade rating before the end of the year.
Blackstone is an anchor investor in the financing arrangement, known as Project North Star, and is working with banks involved in distributing the debt to other investors.
Anthropic filed to go public on Monday, potentially setting up one of the largest stock market listings next month.
Its prospectus outlined plans to spend more than $800 billion on computing infrastructure between now and 2045.
Anthropic’s potential junk rating raises financing concerns
Blackstone has recently indicated that Anthropic is more likely to receive a rating in the double-B range or above, based on guidance from major credit rating agencies, the people cited in the report said.
A double-B rating falls below investment grade and could restrict the company’s access to institutional capital.
Many insurance companies and pension funds face restrictions on taking large positions in borrowers with junk-rated debt.
This could reduce the pool of investors available to finance Anthropic’s infrastructure expansion.
Consequently, the company may need to continue relying on suppliers with stronger credit ratings to support its borrowing arrangements.
An investment-grade rating is important to Anthropic’s long-term financing strategy because it would allow the company to access debt at relatively lower interest rates.
Anthropic currently has more than $112 billion in cash and equivalents.
Investors also anticipate that the company could raise approximately $100 billion through its IPO.
A US technology-focused portfolio manager told the Financial Times that credit access was central to the company’s financing ambitions.
Project North Star relies on Broadcom’s credit backing
The financing concerns come as banks have completed the $63 billion Project North Star deal, which provides funding for Anthropic to lease 1.5 gigawatts of Google’s semiconductors.
More than $42 billion of the senior loans is guaranteed by Broadcom, which co-develops the chips and holds an investment-grade credit rating.
The remaining $18 billion in junior debt is backed by Anthropic’s lease payments.
Senior debt generally takes priority over junior loans in the event of a default, making it more attractive to institutional investors.
Broadcom’s high A-tier credit rating was an important factor in helping Anthropic secure the financing.
Blackstone’s funds invested $9 billion in the junior debt at a yield of more than 10%, according to the Financial Times.
Rating agencies assign different assessments to Anthropic debt
Project North Star’s $18 billion junior debt has received a double-B-plus rating with a positive outlook from Kroll Bond Rating Agency (KBRA).
This represents a modest improvement from the stable outlook assigned to a similar financing arrangement, Project Big Sky, four months earlier.
Morningstar DBRS also assigned the junior debt a double-B rating, according to people familiar with the matter.
However, Fitch, Moody’s and S&P, the three major credit rating agencies with significant influence over corporate borrowing costs, have not officially issued credit ratings for Anthropic.
Bankers representing Anthropic and rival OpenAI have reportedly lobbied major rating agencies to award the AI companies investment-grade ratings following their respective IPOs.
The uncertainty surrounding Anthropic’s credit outlook also coincided with broader weakness in technology stocks.
The Nasdaq 100 fell 3.84% in afternoon trading on Friday following an earlier sell-off triggered by concerns about the sustainability of AI spending.
As Anthropic gets closer to its public market debut, investors need to watch out for the credit ratings the company receives, as they will determine its debt load in funding its AI buildout.
Read our in-depth guides on how to invest in Anthropic and how to buy Anthropic pre-IPO.
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