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A group of creditors of Byju’s has told the edtech giant to liquidate its assets in the USA worth about $500-800 million to repay a part of a $1.2-billion loan if the firm is not able to provide the money from its cash reserves, according to sources in the know.
The lenders recently bought into the loan and are renegotiating the terms of the debt. If Byju’s cannot repay or is unable to liquidate the US assets, the creditors could take legal action, said people familiar with the matter.
The lenders have hired Houlihan Lokey, a global investment bank that focuses on mergers and acquisitions, to advise them on amending covenants after Byju’s allegedly breached terms, according to
the sources. This included a September deadline for filing its results for the year ended March 31, 2022, sources say. Rothschild & Co., which provides global financial advisory, is representing Byju’s in the talks.
“The creditors believe that Byju’s is holding a large part of the funds raised in its US entities and have asked the firm to give their money back from there,” said a person familiar with the matter.
“Discussions are being held right now. If there is no agreement, they can start legal proceedings to liquidate the assets,” the person added.
Another person familiar with the matter said Bengaluru-based Byju’s was in conversation with the creditors and the company was confident that it could repay part of the loan in a few weeks.
A Byju’s spokesperson did not respond when asked for comments on the developments.
One of the issues is that once a company raises a loan, it needs to rate the bonds within nine months. But Byju’s couldn’t do this as its results for last year were delayed.
“This year again Byju’s is unable to finalise its results,” said a person. “This prompted the creditors to either seek full or partial repayment of the loan.”
Some lenders in the group reportedly bought the debt from primary holders in September, when the loan slumped to a record 64.5 cents. They are now seeking to profit from accelerated repayment, according to the Bloomberg report.
The company is seeking a restructuring of the loan, but it faced steep losses. Around this time, some activist investors bought some of the bonds. It is these activist investors that are telling
Byju’s to repay a substantial part of the loan. “When an activist investor tries to get hold of your bonds, then it is trouble,” said a person.
The company had already agreed to various terms that the lenders set. These included hiring a chief financial officer, increasing the interest rate on the loan, and providing monthly business updates, according to the sources.
Byju’s, which is valued at $22 billion, has raised a total of $5.25 billion from investors such as Qatar Investment Authority (QIA), BlackRock, Chan Zuckerberg Initiative, Sequoia, Silver Lake,
Bond Capital, Tencent, General Atlantic and Tiger Global. The firm has over 150 million learners. It recently raised $250 million from its existing investors.
The company has made various acquisitions in the US market. However, Byju’s booked losses of Rs 4,588 crore in financial year 2020-21 (FY21), 19 times more than the preceding year, according to the latest available financial report. The firm earned Rs 2,428 crore in revenue in FY21.
Byju’s announced recently that it would lay off nearly 2,500 employees, or 5 per cent of its workforce, as part of an “optimisation” drive. The firm is looking to become profitable by March, founder and Chief Executive Officer Byju Raveendran told employees recently.
(With inputs from Bloomberg)
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