According to informed sources, Anthropic's massive $36 billion financing deal is maintaining relatively low borrowing costs, thanks to Broadcom's (AVGO.US) commitment to guarantee the largest portion of this record-breaking chip financing transaction.

The arrangers of the deal, Apollo Global Management and Blackstone, are reportedly in discussions with investors regarding a yield of approximately 5.75% for the largest segment of this debt, which amounts to around $25 billion.

Sources indicate that another, riskier portion of the financing that lacks Broadcom's support could carry an interest rate between 8% and 9%.

Despite the transaction's extraordinary size and unconventional structure, the core financing yield being discussed is comparable to some data center financing deals from earlier this year.

Its risk premium may even be lower than that of an investment-grade bond issued in late April for a Google-supported data center in Louisiana, though direct comparisons are challenging given the unique nature of the Broadcom deal.

As reported late last month, Apollo Global Management and Blackstone are jointly raising approximately $36 billion in debt financing for Anthropic to support its large-scale purchase of Google's custom AI chips, Tensor Processing Units (TPUs), which will be leased for Anthropic's use.

Broadcom, which assisted Google in chip development, will guarantee a major part of this transaction.

This deal is poised to become one of the largest private credit transactions on record and the biggest chip financing debt deal to date.

As technology companies ramp up investments in AI data centers and computing infrastructure, the high cost of chips has fostered a substantial market for financing GPUs and specialized chips.

Companies like data center operator CoreWeave have pioneered using GPU-collateralized loans, and this transaction extends the same principle to Google's TPUs.

The financing structure will utilize a Special Purpose Vehicle (SPV): the SPV borrows funds and receives equity investment to purchase TPU chips, then leases the chips to Anthropic.

Debt repayment primarily relies on lease payments and the chips' long-term residual value.

Anthropic plans to deploy the chips at facilities in New York, Texas, Louisiana, and Indiana.

Given that Anthropic, as a startup, lacks sufficient cash flow to support such significant debt on its own, the deal's core relies on Broadcom's strong credit profile.

Broadcom has provided a "residual value support" agreement: if Anthropic fails to make rental payments, the SPV will sell the chips to repay debt; if the chip value is insufficient to cover the debt, Broadcom will compensate holders of the priority Class A1 and A2 bonds for 100% of the shortfall.

This aligns the credit rating of the A1 and A2 bonds with Broadcom's investment-grade rating, while Broadcom's own rating and balance sheet are not directly impacted by the transaction.

By leveraging its top-tier credit rating to support the largest portion of this deal, Broadcom is effectively bolstering investor confidence to provide a massive loan to a young company like Anthropic, even as it faces intense market competition.

This financing arrangement will help Anthropic meet its ambitious goal of significantly expanding computing power to handle the pressure from surging customer demand, as its existing capacity is nearing its limit.

Concurrently, this deal is expected to further strengthen Anthropic's competitive position as it races with OpenAI towards an initial public offering (IPO).

On June 1, Anthropic announced on its official website that it had confidentially submitted draft registration documents for a potential IPO.

In a brief statement, Anthropic said it had filed the paperwork with the U.S. Securities and Exchange Commission, and could proceed with the offering after the review process is completed.

The realization of this IPO depends on market conditions and other relevant factors, with the number of shares and offering price yet to be determined.

Confidential submission is a standard procedure for U.S. IPOs, where the SEC reviews the filing privately before the company publicly releases the full prospectus closer to the listing date.

This approach allows a company to avoid disclosing extensive internal information if the IPO plan is ultimately abandoned.

OpenAI has not yet indicated it has submitted IPO registration documents.

This year, Anthropic has completed at least two major funding rounds. On May 28, Anthropic announced the completion of a $65 billion Series H financing at a post-money valuation of $965 billion.

Based on disclosed post-money valuations, Anthropic has surpassed OpenAI's $852 billion valuation disclosed in March, becoming the highest-valued AI startup currently.

The $965 billion valuation is more than double Anthropic's previous valuation.

According to financial data provider PitchBook, Anthropic's valuation growth rate sets the fastest pace in venture capital history.

PitchBook data also shows that Anthropic reached this latest valuation approximately three years and two months after launching its first product.