JPMorgan's EA Debt Isn't the End for Private Credit

JPMorgan Chase & Co.’s $20 billion debt commitment for the record-breaking buyout of Electronic Arts Inc. is classic leveraged financing, which might seem surprising in a world overrun with private credit. But the boom in alternative lenders and banks’ drive to compete still plays a role – it’s why JPMorgan has a safety net in its own $50 billion direct lending pool if there are any troubles offloading the gaming company’s debt later. Private credit can be banks’ friend as well as foe.

Most major investment banks now have access to private credit funds, either in-house like JPMorgan and Goldman Sachs Group Inc., or through partnerships with other managers like those formed by Citigroup Inc. or Barclays Plc. The EA buyout highlights banks’ ability to blend or switch between private and syndicated loans when pitching for takeovers. Having both sources close at hand should help big lenders avoid getting stuck with unwanted risky loans as several did after Elon Musk’s ill-fated acquisition of Twitter Inc. It will still have to work for the borrower rather than mainly being a way to clear a bank's books.