The $55 billion take-private of Electronic Arts Inc. has already set records, including being called the largest leveraged buyout (LBO) ever, according to market sources. Central to the deal is JPMorgan Chase & Co.’s $20 billion financing commitment, which represents the largest debt provision ever by a single bank for such a transaction.
The deal is a significant win for banks seeking to defend their role in high-stakes leveraged finance deals against competition from the $1.7 trillion private credit industry, which has been increasingly active in funding such acquisitions.
Sources familiar with the deal said JPMorgan’s commitment was made through its leveraged finance arm rather than its private credit division. The financing, expected to be rated in the single-B range, will likely be structured through a combination of high-yield bonds and leveraged loans in a cross-border transaction. The exact structure will depend on market conditions at the time of launch.
The take-private is being led by Saudi Arabia’s Public Investment Fund, Silver Lake Management, and Jared Kushner’s Affinity Partners, marking one of the largest private equity transactions in history. Of JPMorgan’s $20 billion commitment, $18 billion is expected to be funded at closing, with an additional $2 billion set aside as a liquidity facility.
Recent activity in leveraged finance markets has been muted, with most transactions focused on refinancing existing debt due to higher interest rates following the Federal Reserve’s rate-hiking cycle since early 2022. However, demand from investors for riskier debt has risen, partly fueled by the rapid growth of collateralized loan obligations, which package leveraged loans into bonds.
The EA LBO eclipses previous major deals such as Elon Musk’s $44 billion acquisition of Twitter in 2022, which left banks including Morgan Stanley holding around $13 billion of risk that they only recently sold off.
Credit markets are also facing challenges, with unexpected distressed situations, including First Brands Group Holdings’ Chapter 11 filing and Tricolor Holdings’ liquidation, highlighting the riskiness of high-yield debt even as investor appetite grows.
A spokesperson for JPMorgan declined to comment, as did representatives for Silver Lake, PIF, Affinity Partners, and EA.
The Electronic Arts transaction underscores the continued strength and risks of the leveraged finance market, even amid a more cautious lending environment.
