Byju’s, lenders agree to alter terms of $1.2 billion loan

A Term Loan B (TLB) typically is aimed at generating long-term returns on investment through interest payment to investors while the borrower will get time to pay the principal amount only at the end of the tenure.

The sources cited said that according to the new terms, Byju’s and the group of lenders have agreed to work collaboratively toward a signed and completed term loan amendment prior to August 3, 2023. If the loan terms are successfully reworked, then the creditors would drop their demand for accelerated repayment. Further, all ongoing litigation could come to an end while avoiding enforcement actions initiated by the lenders.

A formal agreement with lenders will be of considerable significance for Byju’s as its differences with the former over the $1.2 billion TLB have emerged as a key pain point for the firm, which has been engulfed in a series of crises, including the resignation of its auditor and representatives of its three key investors from the board.

Both Byju’s and the lenders had also initiated litigation in the US courts against each other. In fact, the group of lenders had issued a joint statement on June 9 saying Byju’s lawsuit was ‘meritless’ in what was a sign of increasing tension between the two sides.

On June 6, Byju’s had missed a $40 million interest payment to its TLB creditors after which it filed a lawsuit in New York on the same day.

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While lenders like Glas Trust Company filed a lawsuit against the edtech firm in Delaware, Byju’s filed a suit against hedge fund Redwood and its entities in New York, against their demand for “accelerated repayment”.The group of lenders are now hoping to finalise the amendments to loan agreements over the next two weeks, working closely with the Bengaluru-based edtech firm.

A spokesperson for Byju’s group of lenders did not comment on the development. An email sent to Byju’s did not elicit a response.

Byju’s had also signed a structured credit transaction from Davidson Kempner on May 13 for Rs 2,000 crore. It has, however, only received Rs 800 crore of the total debt, which was contingent on the edtech company resolving its differences with bondholders and linked to a potential equity upside from a future initial public offering (IPO) of startup-owned Aakash Institute.

ETtech

Trigger for new terms

Byju’s is having to rework its loan agreement with creditors after it failed to furnish audited FY22 as well as FY21 results on time. ET first reported on March 20 that the company had offered to pay a higher interest rate to lenders as part of the renewed terms for the $1.2 billion loan.

Along with Byju’s investor-appointed board members — Peak XV Partners (earlier Sequoia Capital India), Prosus (previously Naspers) and Chan Zuckerberg Initiative — Deloitte also resigned as Byju’s official auditor citing delay in receiving the financial statements for FY22.

While Deloitte submitted its resignation to Byju’s on June 22, the investor-appointed board members confirmed their exit from the firm’s board on June 23. Following these exits, the company appointed BDO (MSKA & Associates) as statutory auditor for five years starting with the financial year ending March 31, 2022.

CEO Byju Raveendran and newly appointed CFO Ajay Goel also promised shareholders on June 24 that audited FY22 financials will be filed by September this year, while audited results for FY23 will be released by December 2023. At the same meeting, Raveendran also told shareholders that the exits of Deloitte and the board members were not coordinated.

Byju’s had filed its FY21 (finiancial year 2020-21) financials after an 18-month delay on September 14 last year, which showed ballooning losses at Rs 4,588 crore on revenues of Rs 2,280 crore.

Board advisory committee

To placate investors and creditors over rising concerns about the firm’s corporate governance practices, Byju’s announced in July 13 that it had roped in former State Bank of India chairman Rajnish Kumar and former Infosys chief financial officer Mohandas Pai on its board advisory committee (BAC).

Kumar, who is also the board chair at fintech unicorn BharatPe, and Pai — a former investor in Byju’s through Aarin Capital — have been appointed to “guide and advise” the crisis-hit edtech major on the composition of its board and governance structure. Currently, only Raveendran, cofoudner Divya Gokulnath and Riju Ravindran are on the board of the edtech startup — last valued at $22 billion.

Owing to the delays in the filing of its financial statements for the year ended March 31, 2022, the company has also attracted the attention of the government. ET had reported on a probe of Byju’s books ordered by the ministry of corporate affairs (MCA).

The edtech startup has also brought back one of its former senior executives Arjun Mohan to the firm. He is currently leading the international business but his role may see an expansion, ET had reported on Mohan’s return on July 13.

ET also reported on July 22 that a significant chunk of about 9,000 employees of Byju’s Tuition Centre business have called off a protest against the company’s management after India head Mrinal Mohit called an emergency meeting on Saturday. However, a spokesperson for the company told ET that the town hall was planned well in advance and was not an emergency meeting. It added that the company was not aware of any protests.