Executive Summary

• Although not definitive, S&P clarification is a game changer.

• We believe there are solid arguments that defeasance does not remove EA’s CoC obligations.

• Co-op group improves chances of better outcome.

Although not definitive, S&P clarification is a game changer. S&P published a bulletin on February 20th stating that the agency expects to rate the bonds EA plans to defease based on their issuer credit rating (ICR) on EA once the announced take-private transaction closes and not in line with the default risk of the collateral. While S&P’s criteria for rating defeased corporate bonds does allow the agency to rate corporate bonds based on the default risk of collateral in certain instances, S&P does NOT believe these conditions would be met based on the “currently contemplated structure”. The press release includes an important caveat that the contemplated structure “could change”, so there is still the possibility that S&P could upgrade EA’s rating if Oak-Eagle moves forward with its threat to defease the bonds. However, it appears the issue is that repayment can be accelerated (we believe this is linked to the inability to remove the CoC obligation — see below). We think that curing this issue would require Oak-Eagle to deposit collateral equivalent to the 101 CoC put, which would make defeasance economically irrational.