Edtech Byju's has tentatively agreed to rework its loan pact with lenders who collectively own more than 85 percent of its $1.2 billion Term B loan, people familiar with the matter told the Economic Times. An announcement in this regard is expected early on July 24.
The purpose of a Term Loan B (TLB) is to generate long-term returns on investment by paying investors interest while giving the borrower time to repay the principal amount at the end of the term, the report added.
Byju's and the group of lenders have agreed to work collaboratively toward a signed and completed term loan amendment by August 3, 2023, the report mentioned citing sources. If the the loan terms are successfully renegotiated, the creditors will cease to demand accelerated repayment. More importantly, all ongoing litigation could be resolved without the lenders initiating enforcement actions.
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As Byju's has been engulfed in a series of crises, including the resignation of its auditor and the resignation of its three key investors from the board, reaching a formal agreement with lenders has emerged as a crucial issue for the firm. Byju's differences with lenders over the $1.2 billion TLB have emerged as a key pain point, the report added.
Moneycontrol could not independently verify this report.
Byju's and the lenders also filed lawsuits in the US courts against each other. According to a joint statement released on June 9, the lenders said Byju's lawsuit was 'meritless', which is an indication of growing tensions between them.
A lawsuit was filed in New York on the same day after Byju's missed a $40 million interest payment to its TLB creditors.
Glas Trust Company sued the edtech firm in Delaware, while Byju's sued hedge fund Redwood and its entities in New York against their demand for "accelerated repayment," the report said.
In collaboration with the Bengaluru-based edtech firm, the lenders hope to finalise the amendments to loan agreements within the next two weeks.
As part of the structured credit deal, Byju's signed a Rs 2,000 crore loan from Davidson Kempner on May 13. Aakash Institute has received only Rs 800 crore of the total debt, which was contingent on the edtech company resolving its differences with bondholders and linked to potential equity upside from an IPO, the report added.
Trigger for new terms
After failing to deliver audited FY22 and FY21 results on time, Byju's is having to rework its loan agreement with creditors. As part of the renewed terms for the $1.2 billion loan, the company offered to pay a higher interest rate to lenders on March 20.
Deloitte also resigned as Byju's official auditor citing delay in receiving the FY22 financial statements, along with Peak XV Partners (earlier Sequoia Capital India), Prosus (previously Naspers), and Chan Zuckerberg Initiative, according to the report.
Despite audit firm Deloitte's resignation as auditors of Byju's on June 22, the investor-appointed board members confirmed their departure on June 23. After these exits, the company appointed BDO (MSKA & Associates) as its statutory auditor for five years beginning March 31, 2022.
Byju Raveendran and Ajay Goel, newly appointed CFO, also promised shareholders on June 24 that audited results for FY22 would be released by September, and audited results for FY23 would be released by December 2023. Raveendran told shareholders at the same meeting that Deloitte and the board members' exits were not coordinated.
On September 14 last year, Byju filed its FY21 (financial year 2020-21) financials, which showed ballooning losses at Rs 4,588 crore on revenue of Rs 2,280 crore.
Also Read | Byju’s rules out layoffs at tuition centres, agrees to pay incentives, variable pay
Board advisory committee
Amid growing investor and creditor concerns about the firm's corporate governance practices, Byju's announced on July 13 that former State Bank of India chairman Rajnish Kumar and former Infosys chief financial officer Mohandas Pai had joined its board advisory committee (BAC).
A former investor in Byju's through Aarin Capital, Kumar, who is also the board chair of fintech unicorn BharatPe, and Pai will "guide and advise" the crisis-hit edtech major on board composition and governance. At present, only Raveendran, cofounder Divya Gokulnath, and Riju Ravindran are on the board of the edtech startup, which was valued at $22 billion last year.
Additionally, the company has drawn the attention of the government due to delays in filing its financial statements. The ministry of corporate affairs (MCA) ordered a probe into Byju's books.
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