Anthropic May Not Get Investment Grade Rating After IPO, Blackstone Tells Investors

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Blackstone told investors that Anthropic may not receive an investment grade rating immediately after its IPO, a reversal from its previous forecast that would complicate the AI ​​lab’s ability to finance its massive spending.

The private equity giant told investors in Anthropic’s latest $63 billion chip financing deal that the startup is expected to receive a “high” rating from major credit rating agencies after its IPO, according to people familiar with the matter.

Blackstone is acting as lead investor in the deal, known as “Project North Star,” and is working with banks that have found financing to resell the debt to other investors.

Anthropic filed for an IPO on Monday, setting up what could be the largest listing ever next month. The AI ​​lab’s prospectus describes its “bold but sensible” plans to spend more than $800 billion on IT infrastructure by 2045.

An investment grade credit rating is at the heart of these ambitions, allowing Anthropic to borrow at lower rates to finance its AI infrastructure projects. The group has cash and equivalents of more than $112 billion, and investors expect it could raise about $100 billion more in its IPO.

While Blackstone had told investment partners in recent months that it expected an investment grade rating for Anthropic before the end of the year, it recently signaled that a rating in the double B range or higher was more likely given the guidance it received from major credit agencies, the sources said.

Such a designation would limit the pool of capital that Anthropic could tap, because many insurance and pension funds cannot take large positions in borrowers deemed undesirable. As a result, the company may need to continue to rely on its suppliers with high credit ratings to support its debt raising efforts.

US technology stocks fell to their lowest level on Friday following the FT’s report on Anthropic’s rating, with the Nasdaq 100 down 3.7 per cent in afternoon trading. Markets were sharply lower ahead of the report’s release as profits from Amazon and Intel added to fears about the sustainability of the AI ​​boom.

“It’s all about access to credit, that’s really important… if (Anthropic) is not investment grade, the cost of credit goes up, that’s not good for anyone,” said a US technology-focused portfolio manager.

“It’s a bloodbath out there,” they added, referring to the stock selloff.

Wall Street banks earlier this week closed the North Star deal, which provides the financing for Anthropic to lease 1.5 gigawatts of semiconductors from Google. More than $42 billion of the senior loans are guaranteed by Broadcom, which co-develops the chips and has an investment-grade rating, while $18 billion of the junior debt is guaranteed by rents from the AI ​​startup.

Institutional investors covet senior debt because it takes priority over junior loans in the event of default. Broadcom’s high A-level credit rating was a significant factor in Anthropic securing the financing.

Blackstone funds invested in $9 billion of junior debt at a lucrative yield of more than 10 percent, the FT previously reported. Bankers at Anthropic and rival OpenAI have also pressured the biggest rating agencies to give AI labs investment-grade ratings after their IPOs.

The North Star project’s $18 billion junior debt, which exposes lenders more heavily to Anthropic’s credit risk, was assigned a double B plus rating with positive outlook from rating agency Kroll Bond, a slight improvement from the stable outlook for a similar deal known as the “Big Sky” project four months ago. It also received a double B rating from Morningstar DBRS, the sources added.

The three major credit agencies – Fitch, Moody’s and S&P – which have greater influence over corporate borrowing costs, have not officially issued any credit ratings for Anthropic.

Anthropic, Blackstone, KBRA, Morningstar DBRS and S&P declined to comment. Fitch and Moody’s did not respond to requests for comment.

Additional reporting by George Steer in New York.