Byju’s misses August 3 deadline to rework $1.2 billion loan terms

Meanwhile, a creditors’ lawsuit against Byju’s as part of the dispute is coming up for trial in a US court on Friday.

 

 The company failed to decide on revisions sought by lenders in the loan’s terms, including part repayment and higher interest payments, by the latest agreed-upon date of August 3, according to a Bloomberg report.

 

However, Byju’s on Friday said no deadline had been missed as “August 3 was merely a hopeful date that was likely to be scheduled for a sign off”.

 

“The discussions are going on and it’s progressing well in the right direction and expected to close at the earliest. In fact, the next meeting with the lenders is scheduled early next week,” said Byju’s spokesperson.

 

The firm has missed multiple deadlines to rework the debt, according to the sources.

 

Byju’s, once the most valuable edtech company, has been in the news for all the wrong reasons. These include due diligence and corporate governance issues, the inability to file financials, legal battles with lenders, challenges in raising fresh capital, and a markdown in its valuation by investors.

 

The steering committee (the “SteerCo”) of ad hoc term loan lenders, who collectively own more than 85 per cent of Byju’s $1.2 billion term loan, recently said it and Byju’s had agreed to work collaboratively toward a signed and completed term loan amendment (the “Amendment”) prior to August 3.

 

It had said the successful execution of the amendment would immediately solve the loan’s acceleration and end all open litigations while avoiding further enforcement actions. 

SteerCo recently said it was pleased to make progress with Byju’s toward a completed loan amendment.

Houlihan Lokey served as financial advisor to the term loan lender group and Kirkland & Ellis LLP, Cahill Gordon & Reindel LLP, and Shearman & Sterling LLP are serving as legal advisors.

Byju’s was expected to raise a total of Rs 2,000 crore ($250 million) from Davidson Kempner. But the legal battle between Byju’s and its lenders in the US over the edtech firm’s $1.2 billion TLB, along with the company skipping an interest payment of $40 million on the loan, made the investment firm “extremely concerned” and was considering stopping or slowing down the flow of various tranches of that capital, they said.

Manipal Group Chairman Ranjan Pai is in early discussions to invest in Byju’s-owned tutoring unit Aakash Educational Services Limited (AESL). According to sources in the know, Byju’s founder and Chief Executive Officer Byju Raveendran, who owns 30 per cent in Aakash, is expected to partially offload his holding to Pai for $80-90 million (about Rs 650-740 crore).

Raveendran may use the money to repay a large part of the Rs 800 crore loan that Byju’s raised from US-based investment firm Davidson Kempner Capital Management in May, after facing a ‘technical default’, the sources said.

AESL is now reconstituting its board under an agreement with creditor Davidson Kempner Capital Management LP after certain loan covenants were breached, according to the sources.

“The AESL board is being strengthened with three Think and Learn (Byju’s) nominees and two independent directors,” said Byju’s spokesperson on Friday.

Also, the Institute of Chartered Accountants of India (ICAI) has scrutinised the financial disclosures of the edtech company due to a 22-month delay in the submission of its financial reports. The Ministry of Corporate Affairs has also initiated an inquiry against the company.

This scrutiny may also bring the role of the auditor under question as Byju’s has yet to file its results for 2021-22. Even the 2020-21 (FY21) results filed were delayed. According to the latest available financial report, Byju’s booked losses of Rs 4,588 crore in FY21, 19x more than the preceding year. The firm earned Rs 2,428 crore in revenue in FY21.