Yet another Hacker News

Anthropic assigned highest junk credit rating in June

263 points JumpCrisscross 18 hours ago 82 comments

https://finance.yahoo.com/technology/ai/articles/anthropic-s...

AnodicElegy 17 hours ago | parent

First SpaceX, now Anthropic. I wonder what happened the last time the big rating agencies gave massive amounts of sketchy debt investment-grade ratings to avoid alienating their customers?

collinmcnulty 17 hours ago | parent

Junk ratings are not investment grade. They’re rating this debt as at least a little bit sketchy.

AnodicElegy 15 hours ago | parent

From the article:

"The rating action, which has not previously been reported, shows Anthropic is close to achieving the investment-grade status that would allow the start-up to lower its borrowing costs and tap a wider pool of institutional investors including life insurance companies and pension funds.

Bankers for Anthropic and rival OpenAI have lobbied the largest rating agencies to grant the AI labs investment-grade ratings once they go public."

nickff 13 hours ago | parent

The fact that the only rating published is ‘junk’, and that it was from a small agency tells us quite a lot. Given the fact that Anthropic (or its representatives) likely ‘shopped’ for a rating means that this was the best anyone was willing to give them, and that the larger agencies probably refused to rate them without more information. I would have been surprised if the bankers hadn’t lobbied for the highest rating possible, as higher ratings increase their profits from the IPO.

idiotsecant 11 hours ago | parent

The whole point is to slowly build credibility, starting with easily $wayed small ratings entities, then launder that credibility into a slightly larger one, rise and repeat until financial disaster.

soulofmischief 12 hours ago | parent

Anthropic is planning an IPO and this is information investors would like to have.

QuesnayJr 17 hours ago | parent

It's not a big ratings agency, and it's not investment grade.

nickysielicki 16 hours ago | parent

The point of the headline isn’t to communicate that their debt is currently rated junk, it’s to communicate that it’s impossible for their rating to improve any further without becoming investment grade.

AnodicElegy 15 hours ago | parent

From the article:

Bankers for Anthropic and rival OpenAI have lobbied the largest rating agencies to grant the AI labs investment-grade ratings once they go public."

Tangurena2 16 hours ago | parent

From 2007-2008? Taxpayers bailed out the perps so that they could keep their bonuses.

rcxdude 1 hour ago | parent

Generally didn't happen, despite the common perception. The bailouts saved the banks, they generally did not care to save the owners or executives of the banks.

nixon_why69 1 hour ago | parent

AIG famously continued to pay out huge bonuses the year after they were bailed out.

next_xibalba 46 minutes ago | parent

You’re withholding important context.

Bonuses (owed under preexisting agreements) were an unfortunate necessity. The USG effectively nationalized AIG because it was determined to be too systemically important to be allowed to chaotically fail. So, the new owners needed to retain the employees necessary to continue its operations. To do so, they had to honor employee compensation agreements.

This turned out to be a wise move as the American taxpayer ended up turning a profit on the AIG bailout.

And it wasn’t as though the bonuses were uncontroversial. They were possible bc of loopholes in the bailout legislation. But the government was furious and, alongside public outrage, pressured the executives to give the back bonuses. The house of representatives even passed a bill to tax the bonuses at 90%. Many did voluntarily give them back.

lutanista 12 hours ago | parent

I think the difference is everyone knows Anthropic is a high risk/high reward business that is only a few years old.

It is not like Anthropic was once this stable investment grade company that is now shopping around because the debt is being downgraded.

The headline is just click bait.

kryllic 17 hours ago | parent

Non-paywall link: <https://finance.yahoo.com/technology/ai/articles/anthropic-s...>

skyberrys 17 hours ago | parent

Thanks, very helpful. I was shocked to read they are securing $35B for chips and then to read it's buying chips from alphabet/Broadcom.

nickysielicki 17 hours ago | parent

> Bankers for Anthropic and rival OpenAI have lobbied the largest rating agencies to grant the AI labs investment-grade ratings once they go public. Investors expect the initial public offering this year to hit a valuation of more than $2tn.

Let’s be clear about what this means: it gives them access to the corporate bond market. What they’re lobbying for is that pension funds, life insurance, etc., can take exposure to these companies. Suddenly the everyman, your mom and dad, have significant exposure to these companies and their circular financing deals without even knowing it. This is disgusting.

What a lot of people fail to realize is that the rules around IPOs changed since the dot com bubble. Previously, employees counted as shareholders and companies above a certain threshold of shareholders were required to IPO. This is why companies like Microsoft, Amazon, etc., had the majority of their growth while being publicly traded. This allowed the everyman with a brokerage account to participate in these gains.

These rules were essentially removed by Obama in 2012 through the JOBS act. What this means is that companies can stay private for a majority of their growth phase, which is why we’re seeing IPOs being floated with $2T dollar amounts on them. They’ve privatized the gains, and they only IPO once they want to cash out.

So let’s understand clearly what’s about to happen: early VC investors in oai/ant are going to make billions selling dogshit to your parents pension funds, your parents pension funds are run by idiots who will gleefully take the AI exposure and are legally allowed to take that AI exposure because the AI companies lobbied the credit rating agencies to allow it, and when the bills come next year and these companies are completely unable to meet their liabilities, your parents have to postpone their retirements or come back out of retirement to make ends meet.

It’s truly evil. I hope the employees at these companies with dollar signs in their eyes awaiting their multimillion dollar payoff understand the system that they’re participating in and how evil it is.

Point blank: 2008 was about manipulation of the credit rating agencies. This bubble will also be about manipulation of the credit rating agencies. Absolutely deplorable.

And no, just to nip this in the bud, AI isn’t a fad. It’s the most transformative technology of our lifetimes. It’s going to change everything. But that doesn’t have anything to do with chaos in financial markets or malinvestment during the gold rush. It has to do with whether these companies have any kind of moat and whether the billions being poured into current generation chips are going to depreciate over the timeframes that investors think they will.

jinpan 17 hours ago | parent

I don't understand your position.

First you say you don't like that they're accessing the corporate bond market, which is something all public companies can do.

Then you say they should've IPO'd earlier when they were even earlier stage and riskier .. which would allow them to issue bonds even earlier?

What is your position? Or are you complaining for the sake of complaining?

nickysielicki 17 hours ago | parent

I don’t like that they’re fleecing the corporate bond market after privatizing the majority of their upside. Yes, I wanted them to issue their junk bonds even earlier.

What I really want above all else is for credit rating agencies to not face pressure to rerate them favorably because they’re deemed too big to fail.

chunky1994 14 hours ago | parent

How are they fleecing anybody if their rating is junk?

They can lobby all they want but until we see ratings agencies bending to their lobbying in the face of extreme scrutiny from anyone who would buy these corporate bonds I wouldn't go about worrying too much.

pessimizer 12 hours ago | parent

Why would you tell people to wait to worry about it until it's happening? What more use would it be to worry about it then?

Now is when you make sure that the agencies are scrutinized before they give out inflated ratings, and make sure that this nobody agency's ratings aren't enough to get the stuff sold where it could do real damage.

You don't wait until the baby is drowning to worry, you worry when he's stumbling around next to the pool. Even then, you've gotten involved way later than you should have been.

weakened_malloc 11 hours ago | parent

If people are getting 'fleeced' in the corporate bond market, they deserve it because they should know better. Corporate bonds are traded mainly by institutional investors and professionals, not retail like shares are.

nickysielicki 7 hours ago | parent

This is the kind of wisdom that caused the great financial crisis. Funds are limited in what they can invest in. Institutional investors don’t see high returns. They’re under a lot of pressure to maximize returns within the bounds of what they’re allowed to invest in. There’s a reason they’re risk restricted: they are responsible for a lot of money and society puts a lot of trust into them to not piss away their pension funds.

We learned this lesson the hard way twenty years ago. If we let them invest in dogshit, and the credit rating agencies allow them to, they will.

When institutional investors lose, they’re not really risking their own money. They’re risking yours, or at least your cousins or your neighbors.

samiv 13 hours ago | parent

Because for a pension fund the exposure will be much smaller if they're an early investor in a 100m Business than being a late investor in 2T business.

Basically when you invest at the peak of the bubble you're going to be hosed.

freejazz 11 hours ago | parent

If they IPO'd earlier, they'd have to show clean books much earlier

washkitonion 2 hours ago | parent

The point is that John Everyman is assuming this risk transparently by way of retirement funds. Pre-IPO companies are (ab)using lobby pressure to grant them access to these retirement funds without having to face the wrath of public markets.

0xbadcafebee 17 hours ago | parent

I just wish we could invest in the Chinese companies without the USG coming in later and claiming it's illegal to invest in them and seize the investment. It's clear when the US models financially crumble, everyone will jump on the Chinese models. (https://www.foxrothschild.com/publications/investments-in-ch...)

LogicFailsMe 16 hours ago | parent

What's not clear is whether the west can build a separate but equal ecosystem here when VC only funds privatized models, but it was hilarious when some influencer went on and on that Chinese open weight models are unsafe because we don't have access to their training code and data. Serious WTF territory IMO.

elbenshira 17 hours ago | parent

> Let’s be clear about what this means: it gives them access to the corporate bond market. What they’re lobbying for is that pension funds, life insurance, etc., can take exposure to these companies. Suddenly the everyman, your mom and dad, have significant exposure to these companies and their circular financing deals without even knowing it. This is disgusting.

What's the problem? Fund managers—who are in a position to understand the risks more than your everyday investor—can decide if they want buy these bonds or not, just like any other public corporate bond.

nickysielicki 16 hours ago | parent

Most pensions and life insurers and so on are mandate constrained to investment grade only.

2008 wasn't fund managers deciding all together in unison to buy bad mortgages. It was AAA ratings on diversified MBS that should have been rated much lower giving them cover to load up.

intrasight 16 hours ago | parent

CoreWeave is making the same case for its bonds.

rhdunn 15 hours ago | parent

And CoreWeave's stocks are trending down due to concerns over its debts.

[1] https://www.wsj.com/livecoverage/stock-market-today-dow-sp-5...

[2] https://www.tradingview.com/news/seekingalpha:173ffc32a094b:...

[3] https://www.cnbc.com/2026/10/15/coreweave-credit-default-swa...

33d3aa 15 hours ago | parent

Correct - there are no freebies here!

You can't really rip off bond-holders when you are not positive EBIT and EBITDA...

samiv 13 hours ago | parent

Someone working for a fund and whose job is to INVEST is going to loose their job for NOT buying into the ponzi scheme that is running 20% growth YoY

33d3aa 16 hours ago | parent

Its rated as junk.

And if default risk rises, yes the value of those bonds will get crushed. But Id argue the value of equity will be more so - since they are not A) positive EBIT B) EBITDA

Those two numbers are variables that compose measures of default risk.

Calm your panties down. Kroll != S&P.

soulofmischief 12 hours ago | parent

Yes, and there must be a reason they went with Kroll instead of someone else. It is possibly a bad reason, and we should by default be skeptical and assume such with the little information we have, until proven otherwise.

ares623 6 hours ago | parent

A-fucking-men.

All this, so people like us can do a job that wasn’t that hard in the first place, and in reality was actually quite comfortable, for employers who are promising to lay us off, for productivity gains that aren’t even measurable.

Veliladon 17 hours ago | parent

It's a nice thought but so far none of the hyperscalers seem to give a single fuck about how much the cash costs to borrow.

JacobAsmuth 16 hours ago | parent

It's because their datacenter businesses are growing so fast YoY. Why do you care about the difference in a few percentage points of interest if you're getting 37, 41, or even 82% returns YoY?

33d3aa 15 hours ago | parent

Correct hyperscalars are doing fine - as it stands.

The problem is OAI/Anthropic - but if OAI and Anthropic fail the whole thing comes apart. Goog, Meta etc will be fine as they had tremendous cash flow generating operations prior to datacenter offerings w.r.t LLMs.

JacobAsmuth 14 hours ago | parent

If OpenAI and Anthropic somehow become insolvent to the point that they are unable to continue running inference on their existing trained models, their tens of billions of dollars of monthly revenue will need to go somewhere.

rozap 12 hours ago | parent

If you believe that the upside is effectively unlimited because you automate most or all jobs in existence, then it is "rational" but silly valley rationality usually ignores things that are inconvenient. But if you truly believe the upside is unlimited, then rising interest rates won't scare you.

I think the issues are:

1) that timeline has to line up with the broader macroeconomic factors (unlikely imo)

2) anthropic/openai/etc have to actually capture the value (unlikely given deepseek/glm/etc)

3) for all jobs to be automated, there needs to be a huge shift in the social contract and welfare state, which requires competent and functioning government (lol) and taxes on destruction of labor rather than labor itself (lmao) otherwise you get millions of unemployed people and a deeply unstable society, and a lot of blown up datacenters.

I think the value of AI is unlike anything that has come before, I just don't think the big players will necessarily be the ones capturing it. There will be a lot of spectacular implosions over the next couple years, and AI will continue to march along.

master_crab 17 hours ago | parent

This is not particularly newsworthy. Kroll is not one of the main ratings agencies, and certainly not the one bond purchasers use.

bubbluppugus 16 hours ago | parent

Isn't the "bad" signal here use of such an outlier agency to begin with?

As in "main ratings agencies" see no reason to bother

master_crab 16 hours ago | parent

It’s a fair point. It’s certainly not good but that doesnt = bad. It could be an artifact of FT deciding to report on a nothingburger.

I’d reserve judgement until i see them report more detailed financials and the big ratings agencies step in with assessment.

ares623 6 hours ago | parent

At least this thread has investment grade copium

grumpymouse 17 hours ago | parent

From the article:

>However, Anthropic’s disclosure to KBRA excluded several important financial metrics, including free cash flow and earnings before interest, taxes, depreciation and amortisation. Credit rating analysts had to come up with their own estimates based on assumptions, the documents show.

>Given the limited information, KBRA produced a “risk score” to assess Anthropic’s creditworthiness rather than the traditional full financial models.

This and the fact they went to a small ratings agency does not inspire confidence in the rating.

Someone 15 hours ago | parent

No, but a trillion dollar company going to a ratings agency to get an assessment of its credit rating and not giving that ratings agency enough information to do that doesn’t inspire confidence in that trillion dollar company, either.

Why didn’t they give them the info? They either withheld it or don’t have it. Both make them look bad.

surgical_fire 15 hours ago | parent

but, but... HN told me that Anthropic is profitable. Their margins are supposedly insane!

2PqboPPmKegvanx 15 hours ago | parent

>they went to a small ratings agency

that's a bigger red flag. there may be reasons (bad) to not give them all the info, but going to a smaller agency is the largest of red flags when you are that big of a company.

zem 15 hours ago | parent

honestly not changing my overall feeling that credit ratings are junk science

stusmall 13 hours ago | parent

You can hold both things in your mind and they aren't contradictory. It can be a bad system but it can still be suspicious if someone behaves outside the norm inside it.

torginus 12 hours ago | parent

Other posts made me understand what it actually measures and why is it meaningful - it tells you if you lend this entity money at the govt bond interest rate, will this entity be able to pay back more or less eventiually?

Obviously a financially rational person wouldn't lend money with worse returns it can get from the government risk-free as that would be charity, hence these are considered 'junk'.

wetwater 12 hours ago | parent

I agree but I think both things can be true . Like in this case.

JumpCrisscross 11 hours ago | parent

> not changing my overall feeling that credit ratings are junk science

Then you have been misinformed. Rated bonds by and large fail at the rating predicted by the big three [1].

[1] https://www.ft.com/content/d97e1e86-1e90-4c5c-b972-052d43a36...

nickpeterson 11 minutes ago | parent

I know absolutely nothing about this, but it does strike me it might be self-fulfilling? Companies that have access to more investment tend to win more often, and thus become 'investment grade', while junk-rated firms fail because they don't have the runway?

NooneAtAll3 15 hours ago | parent

so Antropic hid all the bad info, went to more loyal agency...

...and score still showed "high probability of being junk"?

_diyar 13 hours ago | parent

No, the title is poorly phrased, I think you misunderstood.

All ratings agencies have their own scales, but broadly all ratings fall into one of two overarching categories, investment grade vs. junk.

The article explains that the rating ANT received was the highest within the junk range. So “highest junk rating” means within the junk category, it’s in the best sub-area. In other words, it’s just scratching below the investment grade rating.

This is important for institutional investors who can only buy investment grade, meaning if they can improve even one single grade up, they get access to a lot more debt.

neura 11 hours ago | parent

ie: it's almost not rated as "junk" and for that, we should be scared.

toast0 6 hours ago | parent

> This is important for institutional investors who can only buy investment grade, meaning if they can improve even one single grade up, they get access to a lot more debt.

I believe some institutional investors have policies allowing some purchasing of 'highest junk' as well. Depends on the fund, etc.

nashashmi 13 hours ago | parent

KBRA is tasked with producing a rating. Insufficient information won't stop that task. The rating has the confidence it deserves: Anthropic is hiding the bad data and as such no one can rate them highly.

JumpCrisscross 11 hours ago | parent

> KBRA is tasked with producing a rating. Insufficient information won't stop that task.

Rating agencies will absolutely refuse to rate if provided insufficient information.

JumpCrisscross 10 hours ago | parent

> a small ratings agency

If you look at 10-year default rates for BBB-rated paper from the big three plus EJR, AM Best, KBRA and DBRS, you find everyone tightly clustered in the 1 to 2% range except KBRA, who was up at 4% [1]. That suggests they've historically rated junk bonds as barely investment grade. I'm assuming that's what Anthropic was hoping for.

[1] https://www.ft.com/content/d97e1e86-1e90-4c5c-b972-052d43a36...

rsync 9 hours ago | parent

"This and the fact they went to a small ratings agency does not inspire confidence in the rating."

...

"If we don't work with them they will go to our competitors. Not our fault. Simply the way the world works."[1]

[1] https://www.youtube.com/watch?v=mwdo17GT6sg @ 3:31

matheusmoreira 15 hours ago | parent

Starting to sound like subprime loans to me...

gruez 15 hours ago | parent

Subprime loans blew up because it was a bunch of opaque securities (mortgages sliced and diced together) that lenders thought were safe, but really weren't. Anthropic debt doesn't have this issue because everyone knows about anthopric and their business model.

bushido 15 hours ago | parent

As long as we aren't creating GPU-backed securities, we should be fine...oh wait https://nvidianews.nvidia.com/news/nvidia-partners-with-apol...

gruez 15 hours ago | parent

GPU backed securities also don't have that issue because they're far more transparent. The problem with mortgage backed securities is that nobody has the time to inspect the credit worthiness of each mortgage in a MBS, each creditor has hidden correlated risk (eg. if the whole economy tanks), and on top of all that trenching obfuscates the risk. Lenders therefore had to take the credit ratings on face value. It's hard to make the mistake with datecenter/gpu/anthropic debt.

bushido 14 hours ago | parent

> The problem with mortgage backed securities is that nobody has the time to inspect the credit worthiness of each mortgage in a MBS

Credit worthiness of each mortgage wasn't the issue with mortgage-backed securities. It was that low value mortgage-backed securities were repackaged into a basket with a mix of securities and given a higher credit rating than what Subprime would have gotten on their own.

This repackaging is absolutely going to happen again with GPUs. If there are GPUs of different generations within the same security, it's already happened.

JumpCrisscross 11 hours ago | parent

> low value mortgage-backed securities were repackaged into a basket with a mix of securities and given a higher credit rating than what Subprime would have gotten on their own

This is fine. Tranching is fine. It works today, it worked in 2008 and it's based on the same mathematics as portfolio theory. (A physical representation would be a dam. You can turn volatile rivers into predictable flows if you hold a bunch in reserve and then let a small amount off the top.)

Nobody knew that for certain, however, and that was a problem if you needed cash today but verifying the underlying mortgages would take months of work. (Some AAA-rated CDOs defaulted though they all paid out in the end. There has never been a AAA-rated CLO default since like the 1990s.)

JumpCrisscross 11 hours ago | parent

> Subprime loans blew up because it was a bunch of opaque securities (mortgages sliced and diced together) that lenders thought were safe, but really weren't

Not quite. They blew up because the opacity meant nobody could verify that their paper was safe. That made them unsaleable. In the end, AAA-rated crisis-era paper all paid out and almost all of them paid out on schedule. But that doesn't help you if you need to fire sell them today.

Put more succinctly, a lot of people assumed that because Treasuries are highly rated and super liquid all highly-rated paper could be counted on to be liquid. Lenders thought the safe paper was liquid. In the end it was just safe.

jtrn 15 hours ago | parent

Every now and then I read articles from the Financial Times just to confirm that they are still a terrible source of information.

BB+ is technically junk. But the it is one notch from investment grade. Also Junk ratings are normal for young. So the framing is sensationalized.

"Growth has slowed" is technically true but misleading. Q2 to Q3 still went from $11.5bn to $16.8bn. And at those levels, it’s not wildly unexpected that it has to slow down.

And the bias is obvious when they write "Despite limited disclosures" which makes it sounds suspicious, when it’s normal thatrivate companies don't publish financials.

It’s also technical errors. Broadcom agreed to support the residual value of the chips, they did not guarantee the loan.

When journalists and news organizations are this terrible at basic reporting, Within their own specialized domain, it's hard to find sympathy for their complaints about AI-generated content taking over.

Edit: after another look I found that the agency that gave the rating also is a new small one with not very good record eighter (Kroll Bond Rating Agency).

Alternative title: Small Agency, which is previously has been fined for Ratings Without Method, Guesses that Anthropic's Numbers are close to normal for startups; FT Reports the Guess as News.

techblueberry 15 hours ago | parent

‘Growth has slowed" is technically true but misleading. Q2 to Q3 still went from $11.5bn to $16.8bn. And at those levels, it’s not wildly unexpected that it has to slow down.’

The growth slowdown is decidedly unexpected. The market priced in a $2T valuation that assumed it wouldn’t slow down.

https://www.reuters.com/business/finance/investors-temper-an...

xnx 15 hours ago | parent

Obligatory Arrested Development reference: Upgraded from Triple-Sell to Don't Buy (https://www.youtube.com/watch?v=qK5nqmHz0UA)

yrjrjjrjjtjjr 14 hours ago | parent

Bonds and a high risk high reward business model feel like a bad fit.

Like if there is a significant risk of bankruptcy then there must on the other side of the scale be a possibility of making bank like you have with stock or derivatives.

AndrewKemendo 12 hours ago | parent

I mean consider that Oracle is BBB so it’s not crazy that they will get into some portfolio

andai 11 hours ago | parent

https://archive.ph/52dzo

A link to the criminal mastermind that makes free speech possible here.

Havoc 3 hours ago | parent

> highest junk

Hilarious