Anthropic, 60 billion debt for Google’s chips: Blackstone set to see returns of over 10 per cent
The artificial intelligence company aims to finance the purchase of semiconductors with a capacity of 1.5 gigawatts. The cost of capital has risen from 8.5 per cent four months ago, whilst investors are becoming increasingly cautious about investing in AI
Anthropic is prepared to pay returns in excess of 10 per cent to finance its artificial intelligence infrastructure. The US company has offered Blackstone particularly favourable terms to participate in a $60 billion debt facility, known as ‘Project North Star’, designed to support the procurement of approximately 1.5 gigawatts of customised semiconductors developed by Google.
The deal, which could become the largest-ever financing round for the purchase of chips, represents a litmus test for the artificial intelligence-related debt market. On the one hand, companies in the sector need substantial resources to rapidly expand their computing capacity; on the other, investors are demanding ever-higher risk premiums to finance spending plans that require enormous amounts of capital within a short timeframe.
According to sources familiar with the negotiations cited by the British newspaper, Blackstone’s funds are set to invest $9 billion in the subordinated tranche of the financing, which totals $18 billion. The debt is secured by payments under five-year lease agreements that Anthropic will have to pay for the chips.
Blackstone is said to have been offered a coupon rate of 10 per cent, with an even higher overall yield when taking into account discounts on the issue price and other fees. The remainder of the 9 billion in subordinated debt is expected to be placed with a wider range of investors in the coming months, potentially on less onerous terms.
The cost of capital is also significant when compared with the bond market. For an issuer with a similar credit profile, the required yield on the public market is around 7 per cent, according to the ICE BofA BB US High Yield Index. The premium paid to Anthropic’s lenders therefore reflects the risks of the transaction and the need to secure substantial financial commitments.
