The private credit market is providing unprecedented financial firepower for the artificial intelligence infrastructure race.
According to reports on June 6th, Apollo Global Management LLC and Blackstone Group LP have completed a $35 billion financing arrangement. The funds will be used to purchase Tensor Processing Units (TPUs) custom-developed by Alphabet for Anthropic, which will then be leased to Anthropic for its use.
Broadcom provided a credit backstop for the largest tranche of senior debt in the deal, with Morgan Stanley acting as an advisor and helping to arrange the transaction. This is one of the largest private credit deals to date, marking a milestone stage for the emerging 'chip financing' market. The transaction was priced in three tranches, with approximately half of the debt already distributed to other institutional investors.
As mentioned previously, Broadcom's CEO Hock Tan stated on this week's earnings call that the company is collaborating with Apollo, Blackstone, and other leading investors to build an infrastructure system called the 'AI XPV platform', aiming to deploy over 20 gigawatts of computing capacity by 2028. This Apollo transaction represents the first implementation for that platform.
Analysis suggests the timing of this financing's completion is particularly sensitive—Anthropic recently confidentially filed for a U.S. IPO and last month completed a $65 billion funding round, valuing it at $9650 billion. This debt arrangement further solidifies the funding base for its AI infrastructure expansion and sets a new benchmark for the chip financing model across the industry.
Deal Structure: Three Debt Tranches Plus SPV Equity
This financing utilizes a Special Purpose Vehicle (SPV) structure. The SPV raises funds through a mix of debt and equity to purchase the chips, which are then leased to the client. Debt repayment primarily relies on lease income, supplemented by the long-term residual value of the chips as support.
The $35 billion debt is structured and issued in three tranches. The senior A1 tranche is $6 billion and the A2 tranche is $24 billion. Both tranches received Broadcom's credit backstop, enabling them to benefit from lower financing costs matching Broadcom's strong credit rating and to receive medium investment-grade private ratings.
Reportedly, informed sources revealed that the A1 tranche was sold to a group of banks at a coupon rate 100 basis points above the U.S. Treasury rate. The A2 tranche was priced at par with a 5.75% coupon, with buyers including institutional investors like Apollo's Athene insurance unit, which prefer high-quality debt to match their long-term liabilities.
The third, B-class note tranche is $4.5 billion, does not have Broadcom's backstop, and was sold at par with an 8.5% coupon. Additionally, Apollo's structured finance division, Atlas SP Partners, provided $800 million in equity, effectively becoming the owner of the SPV.
A core highlight of this deal is the 'residual value support' agreement provided by Broadcom. Under this arrangement, if Anthropic fails to fulfill its lease payment obligations within a certain period, the SPV will sell the chips to repay debt investors. If the chip liquidation value is insufficient to cover the debt, Broadcom will bear 100% responsibility for the shortfall for A1 and A2 investors.
This mechanism mirrors the structure of another recent large debt transaction, where Meta Platforms provided similar asset value protection for its Hyperion data center in Louisiana, also arranged by Morgan Stanley. The related bonds (so-called 'Beignet bonds') consequently traded at levels comparable to Meta's corporate debt.
Broadcom's credit backstop gave this chip financing a significant pricing advantage and laid the groundwork for the market-based promotion of this new asset class.
The Chip Financing Market: AI Capital Competition Spurs New Asset Class
This transaction is viewed by the market as a landmark event signifying the formal establishment of the chip financing market. As the new wave of data center construction continues, sustained demand for specialized hardware is expected to drive rapid expansion in this niche market.
Hock Tan explicitly stated on the earnings call that Broadcom's strategic vision is to combine its leading technology with investor partners possessing strong balance sheets to provide sufficient scale computing power for top AI frontier labs like Anthropic and OpenAI at the lowest cost and energy consumption.
He characterized this deal as the 'first tranche' of the AI XPV platform, hinting that more similar transactions will follow.
Analysts believe technology companies are knocking on every door of the credit market to meet the unprecedented capital demands of AI, forcing Wall Street to continuously design new debt structures to keep pace.
The $35 billion transaction completed jointly by Apollo, Blackstone, and Broadcom is not only one of the largest deals in the history of private credit but also provides a replicable financing template for the entire industry.
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