EA leans on an Egan-Jones rating in its fight with bondholders over a 101% payout

Electronic Arts has received an investment-grade rating from Egan-Jones on some of its bonds and is using it in its dispute with creditors. The company's position: after the largest leveraged buyout (LBO) in history, it is not obliged to repurchase these bonds at 101 cents on the dollar. Bondholders say the payout conditions have been triggered and that this amounts to a default. The rating comes from an agency that the SEC is investigating. The regulator is checking whether commercial pressure influenced its ratings.

Where the 101 cents comes from

The figure comes from a standard creditor protection for changes of ownership. Indentures, the documents that govern a bond issue, usually give holders the right to demand repurchase at 101% of face value. The right kicks in when a company passes under the control of a new owner and at the same time loses its investment-grade rating. For a creditor, it works as insurance. If debt has grown after the deal and the bonds have fallen in price, the holder can get their money back with a small premium.

This is the mechanism now being contested. The EA buyout was announced in 2025: about $55 billion, $210 per share, with a consortium of Saudi Arabia's sovereign wealth fund PIF, Silver Lake and Affinity Partners. Borrowed money covers a significant part of the price, and the debt lands on EA's own balance sheet. For holders of the older bonds, this changes the risk profile considerably: the company they lent to has become markedly more leveraged.

The role of Egan-Jones

If the buyback trigger depends on losing an investment-grade rating, everything comes down to who decides what counts as a rating. EA says that for some of its issues there is an investment-grade assessment from Egan-Jones. Therefore, under the wording of the documents, the event that gives the right to a buyback has not occurred. Creditors see it differently. They cite a default and insist on payment.

EA's position has one weak point: the reputation of the agency itself. Egan-Jones is certified as a rating agency but is under SEC investigation. The question is whether commercial pressure influenced its ratings. The available information does not make clear which bond issues the rating covers or when it was assigned. That matters, because indenture wording differs from issue to issue.

What is known so far:

• the deal: the largest LBO in history, about $55 billion;
• the amount in dispute: repurchase at 101% of face value versus a refusal to pay;
• the rating: investment grade, from Egan-Jones, for only a subset of the bonds;
• the creditors' position: a claim of default;
• the risk for EA: an SEC investigation of the rating agency.

Practical takeaways

For the industry, this is an instructive precedent: the bigger the deal, the more the wording of old debt documents costs. If a court or the market accepts the Egan-Jones rating as sufficient, other buyers will have a ready-made template. Bondholders would then have to check more carefully which agencies the indenture names, and ask for an explicit list. If EA's argument fails, the cost of the repurchase will fall on the deal structure. Investors in the consortium and the banks that arranged the financing may feel it.

Gaming and technology companies that are preparing for an acquisition, or issuing debt themselves, should look at change-of-control terms in advance. Three things matter: which agencies count under the documents, what happens when they disagree, and whether there is a gap between the date of the deal and the date the rating is assigned. Two events are worth watching: the ruling on the creditors' claim and the outcome of the SEC review. They will determine whether Egan-Jones keeps its weight in such disputes.