JPMorgan, Goldman Sachs Cut Exposure to Volta's ~$5 Billion AI Loan, Underwriting Only $1.3 Billion of It

October 13, according to Bloomberg, JPMorgan and Goldman Sachs adopted an unusual risk control arrangement when leading an approximately $5 billion loan sale for AI cloud startup Volta Infrastructure Holdings: the two banks only underwrote $1.3 billion of the term loan, while about $3.7 billion of chip-related loans were not underwritten, in order to reduce their own exposure. People familiar with the matter said the move was intended to guard against the risk that investors would demand higher returns for high-risk AI debt and that banks would be forced to hold the loans if they failed to sell.

The debt was priced at a yield of about 11%, one of the higher levels seen in the leveraged loan market for AI financing, and the deal was unrated, which typically makes it difficult for collateralized loan obligations (CLOs), the largest buyers of such debt, to participate. Banks usually underwrite the entire debt package to assure borrowers that funds will be available, but after the sharp rise in interest rates in 2022 led to losses on unsold loans, they have become more cautious about unproven AI financing structures. The loan subscription commitment deadline is October 14; JPMorgan had already begun sounding out investor interest in August.