Broadcom CEO Hock Tan reportedly intervened to seal $63B Anthropic debt deal

The CEO of chip maker Broadcom (AVGO) had spent nearly two months trying to get banks to commit over $40B to the largest artificial-intelligence debt deal ever, according to a media report on Monday. It was meant to allow Anthropic (ANTHO) to lease specialized chips that Broadcom is developing with Google.

Though Anthropic was the main beneficiary of the deal, the startup needed help from its bigger commercial partners to raise the money. Together, Anthropic and Broadcom were trying to close the deal ahead of Anthropic’s filing for its widely anticipated initial public offering, the Wall Street Journal reported.

Broadcom, the supplier of chips to Anthropic, was at the center of the action. Thanks to its sterling credit rating, it had already agreed to provide some financial guarantees to make banks more comfortable with the sizable risk of lending over $40B, the report said. But over the past few weeks, some of the banks grew increasingly anxious about participating in the deal, known as “Project North Star,” sources told the Journal.

Given the rise in interest rates and growing difficulties in the markets for artificial intelligence ventures, some banks felt they weren’t being compensated enough to take the risk and considered pulling out altogether, the report said.

In the end, Broadcom’s (AVGO) CEO Hock Tan held 11th-hour talks with bank executives over the weekend to get them to finalize their commitment to the deal and also agreed to higher interest rates on the loans.

Banks also got more comfort around the guarantees from Broadcom that will protect them from losses in case Anthropic defaults on the loans, the report added. The deal, led by Bank of America (BAC), Citigroup (C), and Morgan Stanley (MS), was announced late Monday after Anthropic released its IPO filing. Another chunk of debt, partially financed by Blackstone (BX), brought the total commitments to $63B.

In the North Star deal, a shell company is borrowing the $63B to buy the chips designed by Broadcom and Google, known as tensor processing units. Anthropic’s lease payments are used to repay the loans, and Broadcom uses its balance sheet heft to guarantee that lenders will get their money back. Since the borrower is the shell company, Broadcom (AVGO) only assumes risk if Anthropic can’t make its payments.