EA leveraged buyout debt adds $1.8bn annual interest, raising pressure on studios
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Electronic Arts now carries roughly $1.8bn in annual interest payments on $20bn borrowed from Morgan Stanley after its leveraged buyout by private equity and Saudi Arabia’s Public Investment Fund. Finance professor Adrian Fernandez-Perez says debt repayment will become the company’s overriding priority, pushing new games, research and development to the sidelines. The added burden increases pressure for studio efficiencies and layoffs even as EA has not confirmed formal cuts.
Leveraged Buyout Structure
Electronic Arts completed its move to private ownership last week after months of governmental approval. The publisher is now co-owned by private equity firms and the Kingdom of Saudi Arabia’s Public Investment Fund. Rather than pay the full acquisition price, EA borrowed roughly $20bn from Morgan Stanley. The debt requires interest payments of around $1.8bn each year.
Expert Debt Warning
Eurogamer spoke with three experts, including Adrian Fernandez-Perez of the University of Dublin’s Michael Smurfit Graduate Business School. Fernandez-Perez said the acquired company, not the buyer, must repay the debt, making debt service the top objective. He added that new game production, research and development will be postponed. The professor said streamlining may mean cutting unnecessary expenditures and unprofitable parts, which could include layoffs.
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