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

According to a media report on Monday, Hock Tan, the CEO of chipmaker Broadcom AVGO, spent nearly two months trying to get banks to agree to provide more than $40 billion for the largest artificial intelligence debt deal ever. The money was meant to let Anthropic (ANTHO) lease special chips that Broadcom is developing with Google.

Anthropic was the main company benefiting from the deal, but the startup needed help from its larger business partners to raise the money. Anthropic and Broadcom worked together to complete the deal before Anthropic filed for its widely expected initial public offering (IPO), according to the Wall Street Journal.

Broadcom, which supplies chips to Anthropic, played a central role in the deal. Because Broadcom has a very strong credit rating, it had already agreed to provide some financial guarantees. These were meant to make banks more willing to accept the risk of lending more than $40 billion, the report said. But in recent weeks, some banks became more worried about taking part in the deal, called “Project North Star,” sources told the Journal.

Interest rates were rising, and markets for artificial intelligence companies were facing growing problems. Some banks felt they were not being paid enough for the risk they would take. According to the report, they considered leaving the deal entirely.

In the end, Broadcom AVGO CEO Hock Tan held last-minute talks with bank executives over the weekend to get them to finalize their promises to provide the money. He also agreed to higher interest rates on the loans.

The report added that the banks received more reassurance about Broadcom's guarantees, which would protect them from losses if Anthropic failed to repay its loans. The deal was led by Bank of America BAC, Citigroup C, and Morgan Stanley MS. It was announced late Monday, after Anthropic released its IPO filing. Another part of the borrowing, partly funded by Blackstone BX, brought the total amount banks and other lenders had agreed to provide to $63 billion.

Under the North Star deal, a shell company will borrow the $63 billion to buy chips designed by Broadcom and Google. These chips are called tensor processing units. Anthropic will pay to lease the chips, and those payments will be used to repay the loans. Broadcom will use its strong financial position to guarantee that lenders get their money back. Because the shell company is the borrower, Broadcom AVGO faces a financial risk only if Anthropic cannot make its payments.

Broadcom shares rose 1.3% in trading after the regular market session ended.