Bengaluru :
The country’s leading startup, Byju’s, finds itself in uncertain waters as negotiations for a $1200 million term loan continue without a settlement.
The deadline of August 3, set for reaching an agreement, has come and gone, leaving the future discussions in limbo.
While progress is being made in the right direction, no concrete outcomes have been achieved yet, according to sources from Moneycontrol.
Byju’s spokesperson clarifies that the company was never committed to a fixed timeline.
Co-founder Byju Raveendran is scheduled to meet with lenders next week, offering hope for a resolution.
Who Set the August 3 Deadline
The Committee of Adhoc Term Loan Lenders fixed the August 3 deadline for completing the term loan negotiations between Byju’s and the lenders.
Announced formally on August 24, the committee comprised lenders who had provided 85 percent of the $120 million term loan to Byju’s.
Their aim was to finalize the amendments to the loan terms before August 3, 2023,
with the hope of putting an end to all loan-related disputes.
The Background Story
Back in November 2021, Byju’s secured a $120 million loan from foreign investors through Term Loan B (TLB).
This type of loan doesn’t require periodic installments; instead, the entire amount must be repaid at the end of the tenure, possibly with nominal payments during the loan period.
The trouble began in December 2022 when disputes arose between the company and the lenders, and in March 2023, lenders demanded payments citing non-monetary and technical defaults.
Legal Battles and Loan Repayments
In May, lenders filed a lawsuit against Alfa, a wholly owned subsidiary of Byju’s, in a Delaware court, alleging that it withheld $500 million from the lenders.
In response, Byju’s filed a petition in the New York Supreme Court challenging the loan repayment.
The company stopped paying $40 million in interest, which further complicated the situation.
Since then, both parties have engaged in negotiations to revise the term loan rules.
Importance of Swift Resolution for Byju’s
A quick resolution to the negotiations is crucial for Byju’s as any delay could impede its fundraising efforts.
Davidson Kempner, an American investor, had extended a $250 million loan in structured instruments, but the lack of progress in negotiations led Davidson to withdraw $150 million.
Byju’s also technically defaulted on Davidson’s loan, necessitating repayment to retain control of its valuable asset, Aakash Educational Services.
Seeking funds, Byju’s is turning to its previous investor, Ranjan Pai.
Byju Raveendran, holding a 30 percent stake in Aakash, aims to secure the company’s future amid the ongoing challenges.
