Banks Reportedly Got Cold Feet on ‘Project North Star’ Until Hock Tan Stepped In: Broadcom’s $63 Billion Anthropic Financing Back on Track

Bank of America Corp. (NYSE:BAC), Blackstone Inc. (NYSE:BX), Citigroup Inc. (NYSE:C) and Morgan Stanley (NYSE:MS) agreed to provide $63 billion to help Broadcom Inc. (NASDAQ:AVGO) finance artificial intelligence (AI) chips and networking equipment for Anthropic. Reports say some lenders recently considered backing out of the deal.

How the $63 Billion Deal Is Set Up

A newly created company, known as a special purpose vehicle, will use the promised funding to buy Broadcom's XPU AI chips and networking products. It will then lease the equipment to Anthropic. Deliveries are expected to start in 2027.

Bank of America, Citi and Morgan Stanley are arranging the first-lien financing, which gives lenders an earlier claim on certain assets if the borrower cannot repay. Blackstone is the only provider of the promised second-lien financing, which ranks behind first-lien debt.

Broadcom is offering "residual value support" to protect the lenders providing the first-lien financing against some losses if the equipment is worth less than expected.

Some Banks Considered Pulling Out

Some banks became more worried about joining "Project North Star" over the past few weeks, people familiar with the matter told The Wall Street Journal.

Interest rates were rising, and financing AI companies was becoming harder. Some lenders felt they were not being paid enough to take on the risk and considered leaving the deal entirely.

Broadcom CEO Hock Tan held urgent talks with bank executives over the weekend, shortly before the deal was due to be completed. He agreed to higher interest rates, and the banks received stronger assurances about the company's guarantees to help cover losses if Anthropic fails to repay its debts.

Broadcom, Citigroup, Morgan Stanley and Bank of America did not immediately respond to Benzinga's request for comment.

Anthropic's IPO

On Monday, Anthropic filed public paperwork for an initial public offering (IPO) with the Securities and Exchange Commission. The company wants to list its Class A shares on the Nasdaq stock market under the ticker symbol ANT.

The Wall Street Journal reported that Anthropic is aiming to go public during the week of Nov. 16. It hopes to raise $100 billion or more, with a company value of between $1.5 trillion and $2 trillion.

Anthropic, which makes the Claude AI assistant, disclosed in its IPO paperwork that it could receive up to $42 billion in financing from Broadcom and has a five-year lease worth $125.2 billion for access to computing capacity powered by tensor processing units (TPUs), Reuters reported earlier this month.

The Growing Wave of AI Chip Financing

Earlier this year, Apollo Global Management Inc. and Blackstone announced a $35 billion deal to finance chips for Anthropic. Broadcom agreed to help protect the lenders against losses.

Broadcom is also reportedly seeking more than $50 billion to finance custom AI chips for OpenAI, The Wall Street Journal reported.

Space Exploration Technologies Corp. disclosed in a filing on Monday that it had a chip-financing commitment worth about $40 billion with Apollo.