BYJU’S Might Pay Additional $50-60 Mn In Interest On TLB

BYJU’S Might Have To Pay Additional $50 Mn - $60 Mn In Interest On TLB

SUMMARY

BYJU’S has proposed a total interest rate of 11.0-11.5% interest at least, though this is still subject to change

The term loan B was raised at a Libor plus floating interest rate of 550 basis points (5.5%). BYJU’S and the lenders are discussing the interest rates on top of the 550 bps

Earlier this month, BYJU’S accused the lenders of its $1.2 Bn TLB of creating bogus default claims as part of a scheme to gain control of the edtech giant

Edtech giant BYJU’S might have to pay an additional $50 Mn – $60 Mn annually in interest on its $1.2 Bn Term Loan B (TLB) as part of new terms with lenders.

BYJU’S has proposed 11.0-11.5% interest at least, ET said in a report. However, this is still subject to change as the terms have not been finalised yet as the two sides continue their discussions this week.

In July, the steering committee of the TLB, a group of lenders who own more than 85% of the term loan, said they have agreed to work with the edtech giant to finalise the new terms by August 3. However, no announcement has been made on an agreement so far.

BYJU’S has been struggling to freeze the new terms for the TLB. While it has been trying to secure fresh funds, troubles at the test prep major Aakash, lenders and statements from investors like Prosus on corporate governance issues at the edtech, have affected the process.

The term loan B, availed in November 2021, was raised at a Libor plus floating interest rate of 550 basis points (5.5%). BYJU’S and the lenders are discussing the additional interest rates on top of the 550 bps. While cofounder and CEO Byju Raveendran reportedly offered an increase of around 200 bps in March, creditors did not agree to it.

The edtech giant has been making headlines because of the term loan B due to the size of both the loan and the issues surrounding the company. Earlier this month, BYJU’S accused the lenders of its $1.2 Bn term loan B (TLB) of creating bogus default claims as part of a scheme to gain control of the edtech giant during court proceedings at Delaware.

BYJU’S lawyer, Sheron Korpus, added that the distressed-debt lenders are ‘playing hardball’ to create leverage in negotiations for restructuring the loan. Korpus added that lenders, including US investment firms Redwood Investments LLC and Silver Point Capital LP, are ‘making extortionate demands’ of BYJU’S.

On the other front, the edtech giant and New York-based Davidson Kempner have also 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).