FT: Anthropic may receive a junk credit rating after its IPO

Private equity giant Blackstone has warned clients that Anthropic, the world’s most valuable AI start-up, may not receive an investment-grade credit rating shortly after going public, as had been previously expected, the Financial Times reports, citing sources. Major ratings agencies are more likely to give the company a “high” rating within the speculative-grade category, the sources said. The lack of a strong credit rating would complicate Anthropic’s efforts to finance its massive AI spending.

Blackstone has told investors participating in a new $63 billion deal to finance chip purchases for Anthropic that the start-up will most likely receive a speculative-grade credit rating from major ratings agencies after its IPO, according to the FT’s sources. Blackstone is an anchor investor in the chip deal and is working with the banks that provided the initial financing to help sell the debt to other investors.

Bankers working with Anthropic and rival OpenAI have already sought to persuade major ratings agencies to give the AI developers investment-grade ratings after they go public. Blackstone itself had told its investment partners in recent months that it expected Anthropic to receive an investment-grade rating before year-end, the FT notes. However, it has recently revised those expectations. Blackstone now considers a rating in the BB range or above more likely, based on preliminary guidance from major ratings agencies, the sources said.

On Monday, Anthropic filed paperwork to go public, setting the stage for what could become the largest IPO ever as soon as next month. In its prospectus, the AI developer outlined plans to spend more than $800 billion on computing infrastructure through 2045.

An investment-grade credit rating is crucial to those plans because it would allow Anthropic to borrow at lower interest rates, the FT explains. The lack of such a rating would also limit its pool of potential lenders. Many insurance companies and pension funds are restricted from investing heavily in debt issued by speculative-grade borrowers.

Anthropic currently has more than $112 billion in cash and cash equivalents. Investors expect it to raise around another $100 billion in its IPO, the FT reports.

Wall Street banks this week closed Project North Star, a deal that finances Anthropic’s lease of computing capacity powered by Google chips totaling 1.5 gigawatts, the FT reports. More than $42 billion in senior debt under the deal is guaranteed by Broadcom, which co-develops the chips with Google and has an investment-grade credit rating. Another $18 billion in junior debt is backed by Anthropic’s lease payments.

Institutional investors favor senior debt because its holders are repaid before junior creditors if a borrower defaults, the FT writes. Broadcom’s high credit rating in the A range was therefore an important factor in helping Anthropic secure the financing.

Blackstone’s funds invested $9 billion in the deal’s junior debt, seeking an attractive yield of more than 10%, the FT reports. Project North Star’s $18 billion in junior debt, which leaves lenders more exposed to the risk of an Anthropic default, received a BB+ rating with a positive outlook from Kroll Bond Rating Agency. That represents a slight improvement from the stable outlook KBRA assigned to debt in a similar deal, Project Big Sky, four months ago, the FT notes. Morningstar DBRS also assigned Project North Star’s junior debt a BB rating, according to the FT’s sources.