Primary Preview: Electronic Arts Braves AI-Disruption and Iran War Volatility With TLB Launch for $55B LBO; Books for $18B Debt Financing Covered With $20B of Orders

U.S. video game developer Electronic Arts’, or EA’s, launch this week of $5.75 billion-equivalent in term loan Bs has been broadly well received by investors, and marks the first part of the public portion of its $18 billion dollar-equivalent debt package.

Despite the twin shocks to public debt markets from the AI-driven disruption to the software-as-a-service sector and the outbreak of the Iran war, books on the overall offering are already covered at roughly $20 billion across loans and bonds, with a large amount of that figure precommitted upon launch to general syndication.

Investors expect the JPMorgan-led deal to get over the line and be well received, given the relatively attractive pricing for its B1/BB- rating, and EA’s strong back catalogue of brands including Battlefield, Madden NFL, EA Sports FC and The Sims.

But many investors have also raised concerns with the timing of the deal, given ongoing concerns about AI risk and automation, along with worries about the quality of some recent blockbuster games, and increased competition from smaller, independent video game developers.

The record $55 billion leveraged buyout takes the publicly listed company private via a consortium made up of Saudi Arabia’s Public Investment Fund, Silver Lake and Jared Kushner’s Affinity Partners.

The consortium’s deal includes $36 billion in equity, along with $18 billion in new debt, including the TLBs, commitments for a $3.25 billion term loan A (launched in late January), $6.5 billion (equivalent) in secured debt and an additional $2.5 billion unsecured bonds. It has also received commitments for a $500 million unfunded RCF as part of the financing, according to sources.

Pro forma net leverage for the LBO is expected to be 5.0x, based on fiscal 2026 third-quarter pro forma adjusted EBITDA of $3.4 billion.

European investors looking at the deal were divided on the risks and potential rewards from AI, with one buy-sider saying he expected the recent AI-fueled selloff would impact pricing on the deal, and another downplaying the threat from AI to the business.

Software loans have widened significantly in the secondary market in recent weeks, with B- names trading around 200 bps wider since the “SaaSacre” took hold during February. Similarly rated names to EA were pricing in primary at around 300 bps in January, according to Octus data.

The $4 billion seven-year TLB is being marketed at a margin of SOFR+350-375 bps, while the $1.75 billion-equivalent (€1.53 billion) euro tranche is being marketed at Euribor+350-375 bps. Both tranches are being offered at a 98.5 OID.

Price talk on the dollar-denominated unsecured bonds are coming in the mid-8% area, as reported, while the dual-currency secured bonds are coming in the low-to-mid-7% area, with launching expected later this week or early next week, according to sources.
 

Question Marks About Mooted Gen AI Savings

EA sees the potential to bring in an additional $2 billion in revenue by increasing digital advertising in its games, and is well positioned to make AI-related savings on R&D spending and game development, according to sources.

A second European buy-sider raised several longer-term concerns with the business, including the threat to revenue posed by new entrants to the market, and questioned EA’s plans to save money by rolling out generative AI, or Gen AI, tools into its video game development.

The gaming industry has been trying out automation since video games first started, and the latest suite of AI tools are unlikely to resolve the long-standing issue that the AI simply does not understand what it is creating, making its widespread adoption during the creative process challenging due to quality issues, he said.

The second European buy-sider said he expects the deal will be very liquid in secondary and that pricing is good for the rating. By comparison, the B1/B/B+ rated (Moody’s/S&P/Fitch) U.K.-based risk management service provider LRQA recently priced a €500 million TLB due 2032 at 99.5 OID with a margin of E+375 bps, at the wide end of price talk of E+350-375 bps.

One U.S. high-yield bond investor said JPMorgan may take advantage of the positive reception to the loans by adjusting the size of the loan tranche so the bonds total roughly $7 billion. Still, sources cautioned that terms were not finalized and subject to change.

One U.S. loan investor looking at EA’s deal likes the credit, given the video game developer being a global leader in the industry. The large $36 billion equity check for the acquisition as well as the pricing for the deal outweigh any software or AI-related risks, the investor added.

A second U.S. high-yield bond investor with a different view noted that the combination of concerns around the technologic improvements of AI impacting video game development along with the massive size of the buyout has deterred his firm away from the deal. Right now, it feels like the wrong time to be launching such a sizable deal, the investor said, who believes talk [low-mid-7s and mid-8s] should come wider than where it is now.

According to the investors consulted, comparables on EA’s deal include Snap Inc., Dayforce, Ultimate Software Group and Warner Bros Discovery, according to the investor, based on them being large high-yield credit issuers with a legacy position.

Another U.S. investor, themselves an avid video game player, disagreed with much of the AI fear around the credit. Furthermore, they believe Israeli digital entertainment group, Playtika (was the best comparable credit to EA given its leverage and business model, with Roblox (rated BBB-) and Take Two Interactive other good comparables, albeit without much leverage.

Playtika’s (BB-) roughly S+275 bps $1.8 billion secured term loan due 2028 is currently indicated at around 94, according to Solve. By contrast, its 4.25% senior unsecured notes, or SUNs, due 2029, have traded down sharply since the AI risk-fueled selloff began, falling from close to 90 in early January to less than 76, to yield 14.5%, according to Solve data.

Electronic Arts’ Net Bookings Driven by Sports Titles

EA claims to have a global player network of more than 280 million players spread across FC Sports and Madden NFL, which it says collectively represent 58% of net bookings – equivalent to $4.6 billion of the $8.0 billion in net booking in the 12 months to Dec. 31 last year. This figure makes up roughly 70% of franchise adjusted EBITDA, according to sources. Other titles include Battlefield, which was the number one game in the United States last year by sales, with net bookings of around $800 million.

Adjusted EBITDA remained roughly flat at $2.4 billion in the fiscal years 2023-2025, before growing to $2.7 billion in the 12 months ended Dec. 31, 2025, according to sources. Over the same period, unlevered free cash flow came in at $2.0 billion, $2.4 billion, $2.3 billion and $2.6 billion, respectively, with the slight decline in the 2025 fiscal year due to increased operational expenditures ahead of the release of Battlefield 6 last October.

EA’s deal was the most topical deal at JPMorgan’s recent flagship leveraged finance conference in Miami, with the bank previewing the offering to investors. The deal, as well as a debt financing package for software firm Qualtrics, were widely discussed at the conference while dealmaking took a pause amid market volatility being jolted by the war in Iran and ongoing concern around AI’s disruption to software credits. The $5.3 billion debt financing supporting Qualtrics’ acquisition of Press Ganey was pulled this week amid investor concerns over AI disruption, according to news reports.

Bank of America, Barclays, BMO, Citi, Deutsche Bank, KKR, Morgan Stanley, RBC, BNP Paribas, HSBC, Jefferies, Mizuho, MUFG, Santander, UBS, Wells Fargo, Citizens, Scotia and Stifel are bookrunners.

Commitments for the loans are due on Monday, March 23 by 5 p.m. local time. (5 p.m. GMT for the euro tranche and 9 p.m. GMT for the dollar tranche.)

Octus’ Covenants’ legal analysts have completed an analysis of the documentation for EA’s loan, assigning it a 3.85 score.

JPMorgan declined to comment.