Embattled edtech major Byju’s, which has been fighting one crisis after another (including the abrupt departures of its auditor and three of its board members), is now negotiating to pull itself out of hot waters. This time, it is working to amend its loan pact with its lenders, and change the terms of the $1.2 billion Term B loan which it had taken earlier.
According to a report from The Economic Times, the lenders collectively own more than 85% of the $1.2 billion Term B loan, the ET report states, citing people familiar with the matter. Bloomberg reports that the steering committee of lenders on the term loan, as well as the Bengaluru-headquartered Byju’s, will work towards a signed agreement before August 3.
This comes after the edtech firm failed to deliver its audited FY22 and FY21 results on time, which ensured that Deloitte broke short its term with the edtech giant and parted ways with the company. At the same time, Peak XV Partners (earlier Sequoia Capital India), Prosus (previously Naspers), and Chan Zuckerberg Initiative also tendered their resignations from the edtech firm’s board. Byju’s later pledged to file its audited reports soon, but by then it was too little too late.
Later, Byju’s also skipped an interest payment on its term loan, while it suffered raids from the Indian government, which ordered an inspection into its finances after the resignations of its auditor and three board members.
This development comes more than a month after the edtech firm, which has established itself as a dominant player in the edtech space, filed a lawsuit against its lenders concerning the term loan. The loan aimed to generate long-term returns on investment by paying investors interest while giving the borrower (Byju’s) time to repay the principal amount at the end of the term, and the edtech firm alleged that it “had to take these measures following a series of predatory tactics by the lenders, led by Redwood.”
For those who need a reminder, investment management firm Redwood had purchased a significant portfolio of the loan while primarily trading in distressed debt “with the intent of making windfall gains.” Byju’s alleged that Redwood had purchased a significant portion of the loan, which was contrary to the terms of the TLB (Term Loan B). And on June 1, the lenders had pulled out of negotiations to recast the TLB.
If both parties can come to an agreement and amend the loans, the lenders will no longer demand accelerated repayment of the loan, while the ongoing litigation could be resolved without the lenders initiating enforcement actions on the matter.