Electronic Arts’ leveraged buyout, completed in August and described as the largest ever, has a new complication. A group of bondholders is pressing the company for better repayment terms, Game Developer reports, citing The Wall Street Journal.
What the bondholders want
The group holds two tranches of EA bonds worth 750 million dollars each, 1.5 billion in total. It is asking to be repaid at 101% of face value, rather than at par, if EA’s credit rating is downgraded.
Why they are worried
The buyout was financed in part with 20 billion dollars borrowed from JPMorgan, debt that now sits with EA. More leverage can weaken a company’s credit profile and cost it its investment-grade rating, which would push down the value of the bonds already in circulation.
Who owns EA now
The buyers are Saudi Arabia’s Public Investment Fund, Silver Lake and Affinity Partners, the firm led by Jared Kushner.
EA’s response
According to the report, EA is restructuring the bonds by separating principal and interest, so that they behave more like US Treasuries. Game Developer notes that this has little effect on the buyout itself and may not be enough to satisfy bondholders. Bloomberg had previously reported that EA failed to win bondholder support for a buyback by a February deadline.
No new deadline has been made public. For players, nothing changes in the short term. For the studios inside EA, how the company services that debt is the thing to watch.
This article was written with AI assistance from the sources linked above.
