Banks Eye $21 Billion of Bonds for Broadcom Chip-Financing Deal

(Bloomberg) -- Banks are planning to sell as much as about $21 billion of high-grade bonds as soon as early next year as part of a $63 billion funding package that Broadcom Inc. has pulled together to help finance chips for AI developer Anthropic PBC.

Bank of America Corp., Citigroup Inc., and Morgan Stanley helped to arrange the $63 billion deal and other banks are expected to submit commitments to join the group in the coming days, according to people with knowledge of the matter. The banks are lending about $42 billion of the amount, as much as half of which is expected to be refinanced in the US high-grade corporate bond market in the first quarter of 2027, they said, asking not to be identified because they're not authorized to speak publicly.

The financing is being closely watched across Wall Street and Silicon Valley as bankers and tech executives look for assurance that investors are still eager to lend to artificial intelligence projects. While companies have managed to borrow more than $455 billion across markets globally to fund AI-related spending this year, there are signs that money managers are growing warier of investing in the debt, given how much more could be coming.

The transaction is meant to help AI model maker Anthropic pay for equipment including chips for data centers, with Broadcom essentially offering vendor financing. It's set up as a special purpose company, which is borrowing the money to pay for the technology, which it will lease to Anthropic, whose lease payments will in turn pay off the debt, the people said.

The $42 billion portion of the debt is senior secured, meaning lenders have a first claim on the assets of the special purpose company, the people said. Broadcom is providing residual value support — a type of financial backstop — for that portion of the debt. Banks have underwritten the senior secured tranche of the $63 billion financing, said one of the people.

The bonds that are ultimately sold will probably mature in around five years, and principal on the debt will likely be repaid over the life of the notes. The final size of the bond issuance, and the timing, will depend on market conditions, said the person.