Electronic Arts (EA) has launched legal action against creditors seeking an early repayment premium following its $55bn take-private acquisition, potentially exposing the video-game publisher to financing complications involving approximately $18bn in debt, according to a report by Bloomberg.
EA reportedly filed a lawsuit against bondholder trustee US Bank after creditors holding more than $1.4bn of outstanding notes claimed the company had breached its debt agreements by failing to make a required change-of-control payment. The dispute follows EA’s August buyout by an investor consortium led by Saudi Arabia’s Public Investment Fund.
The company argues that it is not in default because the bonds received investment-grade ratings from Egan-Jones Ratings, allowing it to invoke a provision known as defeasance. This mechanism uses US Treasury securities to secure future bond payments, potentially enabling EA to avoid a change-of-control premium estimated at approximately $250m.
However, major ratings agencies including S&P Global, Moody’s and Fitch either assigned speculative-grade ratings or withdrew their assessments. EA is reportedly seeking a court declaration that no default occurred, arguing that creditor enforcement action could disrupt its financing arrangements and trigger cross-default provisions across its parent company’s debt.
