BYJU’S, Davidson Kempner Start Negotiations To Settle Dispute

BYJU’S and New York-based Davidson Kempner have begun negotiations to settle their dispute over the breach of a loan covenant by the edtech giant’s offline test prep arm, Aakash Educational Services Limited (AESL).

BYJU’S has offered to repay the funds it has availed of from the loan and the interest on that amount, essentially giving Davidson Kempner an exit from the edtech firm after a prolonged boardroom saga, ET said in a report citing sources.

The two parties are some way off still – DK is seeking interest on the entire amount for one to two years, while BYJU’S founder Byju Raveendran has proposed a quarter’s interest. The talks between the two companies are centred on the exact payout and a formal proposal is expected this week by the two parties.

Meanwhile, Manipal Group chairman Ranjan Pai is said to have finalised an $80 Mn investment in Aakash. The investment will be used to repay Davidson Kempner, and Raveendran will transfer Aakash’s shares to Pai in exchange for investment.

The Davidson Kempner Saga

This May, BYJU’S signed a $250 Mn (around INR 2,000 Cr) structured credit deal with Davidson Kempner against Aakash’s cash flow. However, the edtech has only received INR 800 Cr from the loan. Incidentally, BYJU’S has reportedly used up over INR 600 Cr from the facility.

Over the past few weeks, a breach of the loan term covenant triggered the US-based investor to start talks to return the money. At the same time, Davidson Kempner allegedly restructured Aakash’s board of directors. Though neither party commented on the development at the time, media reports were strife with speculation around Aakash’s future.

Even as BYJU’S tries to placate Davidson Kempner, it has scheduled crunch talks this week with the steering committee of its $1.2 Bn Term Loan B to sign new terms. Last month, the steering committee, which owns about 85% of the loan amount, said they had agreed to close the terms after discussions with the edtech firm.

Per their statement, the terms were to be signed by August 3, but a formal announcement is yet to be made by either party.

BYJU’S is also said to have written to Aakash founders – the Chaudhry family – and investment fund Blackstone, asking them to honour the pending stock swap part of the deal announced two years ago. However, the two parties have opposed the demand.

The Chaudhrys and Blackstone have reportedly cited a breach of terms, including a delay in furnishing the fiscal 2022 audited financials of BYJU’S parent firm, for the refusal, making it yet another case of delayed financial reporting haunting the edtech giant.

In any case, Raveendran and CFO Ajay Goel have promised shareholders that audited financials for FY22 would be filed by September and audited FY23 results by December.