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Investors have flocked to more than $18bn of debt linked to the $55bn acquisition of video game maker Electronic Arts, in a sign of robust appetite for riskier debt.
The blockbuster debt sale, which will help finance the biggest-ever leveraged buyout, is seen as a critical test for junk-rated bonds and loans at a time of heightened geopolitical uncertainty and AI disruption risks.
The final part of the financing package — more than $6.6bn of high-yield bonds across US dollars and euros — was launched on Monday as US President Donald Trump played up the prospects of ending the Iran war.
“It certainly helped with sentiment,” said David Kinsley, senior portfolio manager at Impax Asset Management. “Banks are taking advantage of the benign market conditions while they can.”
The bond offering follows from an agreement EA struck in September to be taken private by a Saudi-backed consortium assembled by Jared Kushner and private capital group Silver Lake.
The debt sales, finalised on Tuesday, attracted an order book of more than $45bn, according to people familiar with the matter.
On the back of the strong demand, a group of about 20 banks led by JPMorgan decided to sell fewer bonds and more syndicated loans to investors — an arrangement that allows EA to repay debt earlier without an excessive penalty, one of the people said.
JPMorgan declined to comment.
Leveraged loans totalling more than $8.1bn across both currencies were sold at the lower end of the anticipated range, yielding 3.5 percentage points above the benchmark rate at 98.5 cents on the dollar, according to a person familiar with the deal.
The high-yield bonds were also sold at a more favourable price for EA. Secured bonds dominated in euros and dollars are set to yield about 6.25 per cent and 7.25 per cent, respectively, while unsecured dollar bonds would yield about 8.75 per cent, the person said.
The financing package for the deal also includes a $3.25bn term loan held by banks, which was launched in late January, as well as $36bn of equity from the consortium formed by Silver Lake, Affinity Partners and Saudi Arabia’s Public Investment Fund.
“EA made a compelling case for the defensive characteristics of its business, particularly the durability of its exclusive sports licenses and the recurring nature of its cash flows,” said Sinjin Bowron, head of liquid credit strategies at Beach Point Capital Management, which participated in the bond offering.
Market participants have high hopes that EA’s successful debt sale could re-energise the junk-rated debt market and create momentum for deals that have been halted, such as the financing for customer service software group Qualtrics.
“Given the size of EA’s deal, it will embolden banks that have other transactions to launch,” said a US-based banker specialising in leveraged finance.
Still, some investors are sceptical about whether other debt offerings can replicate EA’s success without the same level of backing from private equity firms.
“I don’t think it should be used as a reliable data point, you’re not seeing the same amount of equity in other deals,” said an investor focused on subinvestment-grade debt.
Additional reporting by Eric Platt