Creditors engaged in negotiations with Byju’s, India’s most valuable startup, have abruptly ended discussions related to restructuring a $1.2 billion loan, adding to the mounting challenges faced by the beleaguered edtech startup.
Citing some unknown sources, Bloomberg reports the talks were terminated after the creditors filed a lawsuit, accusing Byju’s of concealing $500 million in raised funds. It’s interesting to note that the lenders are now under no obligation and can sell the firm’s term loan B securities as the locking period, which was part of the negotiations, has been over.
This development poses a significant hurdle for Byju’s, which has been actively seeking to address concerns from creditors by offering prepayments and higher coupon rates to revamp the loan agreement. Although the steering committee of lenders has officially discontinued the negotiations, Byju’s intends to independently approach all lenders in an effort to renegotiate the terms, according to one insider.
Byju’s is required to make an interest payment on the loan by June 5, as per sources. The company’s legal representative stated in a US court last month that a substantial capital infusion is imminent, which would enable Byju’s to repay the loan, while vehemently denying any allegations of fund concealment.
In response to these developments, a spokesperson for Byju’s affirmed that the transfer of borrowed funds was fully compliant with the loan agreement and did not contravene any agreed-upon terms or obligations. Furthermore, the spokesperson highlighted that the lenders themselves have not raised objections regarding the permissibility of the transfer under the existing contractual arrangements.
In an attempt to renegotiate the agreement, Byju’s had proposed an increase of up to 300 basis points in the coupon for the loan due in 2026, along with a partial prepayment of the debt. This proposal followed a missed deadline by the company to submit audited financial results. The company is yet to file its audited report for FY22, ending March 31, 2022, while the others are busy preparing audited report for FY23 ending March 2023 to file. This is not the first time when Byju’s failed to file its audited report. It was only after a long delay, speculations and rumors about its auditor firm Deloitte refusing to sign financial reports the company managed to file its audit report for FY21 with 18 month-delay in September 2022.
The loan in question represents one of the largest unrated debts ever raised by a startup that has been struggling to keep its valuation intact. Quite recently, one of the investors of Byju’s once again slashed the valuation of Byju’s, making it reach a record low of $8.5 billion from $22 billion a year ago.
Currently, the loan is quoted at around 79 cents, based on Bloomberg’s data.