Byju and its lenders missed an August 3 deadline to redo the terms of a $1.2 billion loan, prolonging the uncertainty that engulfed its most valuable startup. India.
Sources familiar with the matter said the loan modification talks were progressing “in the right direction”, but the two sides were still unable to reach a conclusion. While the lenders want the amendment by August 3, Byju`s has never committed to such a date, the people who requested anonymity said. Byju Raveendran has a call with lenders next week and both sides are hopeful for an outcome.
“Discussions are continuing and it is progressing well in the right direction and should end at the earliest. In fact, the next meeting with the lenders is scheduled for early next week. A Byju spokesperson said no deadline has been missed, as August 3 is just a hopeful date that could be scheduled for approval.
Byju’s lenders did not respond to questions.
The deadline for reaching the amendment was officially announced on July 24 by a steering committee of special-term lenders, who collectively own more than 85% of the 1.2-term loans. Byju’s billion dollars. The Commission has stated that it and the company have agreed to work collaboratively to achieve a signed and completed amendment to the Term Loan (“Amendment”) by August 3, 2023. .
“Successful implementation of the amendment will immediately resolve loan acceleration and end all open litigation while avoiding further enforcement actions,” the lenders said in the statement. .
Background
Byju`s raised $1.2 billion in debt through a Term Loan B (TLB) in November 2021 from a group of foreign investors. CTR refers to a premium secured credit syndication with global institutional investors. Traditionally, TLB’s product has been used to refinance a company’s existing debts or to make overseas acquisitions with the aim of enriching the company’s offer.
But since last December, the company has been in conflict with lenders. In March, lenders first accelerated CTR due to certain alleged technical and non-monetary defaults, and then in May the lenders sued subsidiary Byju’s Alpha Inc. wholly owned by the company in a Delaware court for allegedly hiding $500 million from them.
A few weeks later, Byju’s sued the lenders in the New York Supreme Court, challenging the CTR acceleration. He also failed to pay $40 million in interest after speeding. Since then, both sides have had multiple calls to reach an amendment.
The amendment is likely to be seen as an important step in the negotiations, and a delay in reaching an amendment could make it more difficult for Byju to raise new capital, which needs to overcome the situation. immediate liquidity crisis. Currently, Davidson Kempner, a US-based investor that loaned Byju $250 million in structured instruments in May, has withheld nearly $150 million as a result of company negotiations. companies with lenders are not doing well. The Economic Times first reported the development in June.
In addition, Byju also technically defaulted on Davidson Kempner’s loan, prompting Byju Raveendran to raise capital to repay the loan in order to avoid losing control of its most valuable asset, Aakash Education Services. Byju provided Aakash stock as collateral for Davidson Kempner’s loan.
Byju is currently considering fundraising from one of its early backers, Ranjan Pai, for Aakash Education Services. Pai is set to buy back a portion of Byju Raveendran’s stake in Aakash, Moneycontrol reported earlier this week. Ravenendran holds nearly 30% of Aakash’s capital.
Corporate restructuring
According to an article in the Economic Times of August 4, Davidson Kempner has begun to reshuffle Aakash’s board and introduce four new members.
Mrinal Mohit, CEO of Byju`s, Anita Kishore, Chief Strategy Officer of Byju`s, and Divya Gokulnath and Riju Ravindran, two co-founders of Byju`s, have stepped down from Aakash’s board of directors. , the report said. However, the company has yet to file anything about it with the Ministry of Companies (MCA). If the Ranjan Pai-led grant is successful, it will provide much-needed relief to Byju’s, which is currently facing a number of challenges. These challenges include immediate liquidity constraints due to the lengthy fundraising process for its parent company, Think and Learn Pvt.
In addition, the funding effort reflects Raveendran’s intent to ease its debt burden while welcoming trusted equity investors to become part of the company’s ownership.
Byju’s has been actively participating in a major fundraising campaign since the beginning of the year. However, they had difficulty closing the funding round. As a result, the company had to resort to a number of cost-cutting measures, including laying off more than 2,000 employees, postponing reviews and giving up office space.
