JPMorgan Tees Up EA Debt Sale as Iran War Shakes Credit Markets

As JPMorgan Chase & Co. kicked off investor talks this week on $20 billion in financing for Electronic Arts Inc., tensions from a protracted war in the Middle East overshadowed the largest-ever debt sale for a leveraged buyout.

But within days of President Donald Trump saying the war with Iran was almost over, oil prices fell and stocks recovered their losses.

That gives bankers the confidence to say the deal supporting the acquisition of the video game maker by a private equity consortium will begin on Monday, according to people with knowledge of the matter. While market participants worried that further volatility would lead to delays, the EV financing is on track, the sources said on Wednesday, asking not to be named because the timing is confidential.

Representatives for EA and JPMorgan declined to comment.

The Wall Street lender is among the leading underwriters working to distribute most of the $20 billion debt package to institutional investors. Silver Lake Management, Saudi Arabia’s Public Investment Fund and Affinity Partners agreed to buy the company in September in a deal valued at about $55 billion.

Work is ongoing on the exact structure of the financing, with JPMorgan currently tending to sell more junk bonds than originally planned. The deal also includes leveraged loans.

While initial discussions about pricing are largely in line with new deals recently offered to investors, there is an expectation that a transaction this large will likely involve a premium to attract buyers.

Secured bonds in the deal (expected to total about $6.5 billion) could offer yields in the low 7% range, people familiar said. That compares with the roughly 6.9% yield offered in the junk bond market on Wednesday, according to data compiled by Bloomberg. Sources said EA’s euro-denominated bonds could be priced even more tightly.

About $2.5 billion of riskier unsecured debt is expected to be offered at a yield in the mid-8 percent range, while the loans could offer a yield of 3.5 to 3.75 percentage points, according to the benchmark, at a discount of 98.5 to 99 cents on the dollar.

Newly issued leveraged loans provide an average discount of 3.6 percentage points and about 98 cents above the U.S. benchmark, according to data compiled by Bloomberg.

Investors are closely watching the progress of the debt sale as it could determine the course of more than $100 billion in merger and acquisition financing expected to be released in the coming months.

When JPMorgan took on the $20 billion debt package on its own, credit spreads were at their tightest levels since 2021. While it brought in other banks to share the risk, it also provided price protection, known as “flexible”, to offset worsening conditions. That flexibility is expected to be more generous than the 125 basis points typically accepted in most buyout deals, the people said.

Another measure related to financing allows for an increase in the bid spread and provides comfort for banks to settle debts within agreed levels, people familiar said.

Those guardrails could come in handy after weeks of unrest in credit markets, sparked in part by concerns about borrowers in the software industry whose businesses are threatened by artificial intelligence.

Bank of America Corp. About 14% of debt trading in the U.S. leveraged loan market is exposed to software and technology, according to analysts, and distress in the sector is causing prices to fall across the market.

While some new deals have been met with skepticism among buyers, investors are still eager to buy new money at a time when much of the primary market is refinancing existing bonds and loans.

“These deals are benchmark sizes,” said Michael Levitin, portfolio manager at MidOcean Partners. “If you manage institutional investors’ money, it’s imperative to play with these new issues or you threaten to lose your weight in the index.”

If all goes as planned over the next few weeks, JPMorgan and its peers will enjoy nearly $500 million in fees for underwriting the EA deal. If the sale goes wrong, lenders could be stuck—temporarily—in the largest LBO in history, exposing them to huge risks in a volatile market.

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