BYJU’S creditors have time till January 10 to sign a forbearance agreement, which would give the edtech decacorn time till February 10 to negotiate broader terms
The edtech major’s term loan has been a matter of concern as it sought more lenient terms from its creditors earlier
The edtech giant’s creditors were prompted to move for a faster repayment of the term loan after BYJU’S missed the September deadline to file its financial statements for FY22
Edtech major BYJU’S has reportedly sought more time from its creditors to renegotiate an agreement for its $1.2 Bn term loan, which is in breach of covenants.
According to a Bloomberg report, the creditors have until Tuesday (January 10) to sign a forbearance agreement, which would give BYJU’S time till February 10 to negotiate broader terms for the term loan it took out in 2021.
In simple terms, a forbearance agreement is a temporary arrangement which allows a debtor to postpone loan payments.
BYJU’S raised the debt via a term loan for the overseas market in 2021. The edtech decacorn, then valued at $18 Bn, earlier planned to raise around $700 Mn, though ended up raising $1.2 Bn.
It intended to use the proceeds to fund general expenses, including supporting business growth in North America and funding inorganic growth opportunities via acquisitions.
The edtech major’s term loan has been a matter of concern as it sought more lenient terms from its creditors earlier. However, some of the creditors want a faster repayment of the loan and want the startup to use the cash reserves of its US unit. Notably, the US unit holds around $850 Mn in cash reserves, which the creditors have pointed to.
BYJU’S creditors were prompted to move for a faster repayment of the term loan after it missed the September deadline to file its financial statements for FY22. The lenders have hired Houlihan Lokey Inc. to advise them on amending the covenants, while BYJU’S is being represented by Rothschild & Co. in the talks.
BYJU’S took advantage of the interest rate arbitrage available in the global markets in 2021, raising the term loan at Libor plus 550 basis points. Libor, or London Interbank Offered Rate, is the benchmark at which foreign interest rates are set and borrowings take place.
The rate was lower than what was available in the local market and was one of the largest unrated term loan B offerings ever from a startup across the world, according to JPMorgan Chase, one of the deal’s bookrunners.
However, most of the current group of lenders bought into the debt in September last year, when the loan slumped to a record low of 64.5 cents. Since then, the loan has risen to 81.9 cents on the dollar on Monday (December 9), according to Bloomberg.
BYJU’S reported a 19.8X jump in its loss to INR 4,588 Cr in FY21 from INR 231.69 Cr in FY20. Total income also declined 3.3% to INR 2,428.3 Cr from INR 2,511.7 Cr in FY20.
To rein in some of the losses, the edtech giant fired 2,500 employees or 5% of its workforce in October 2022. At the time, BYJU’S said the move was to ‘rationalise operations’.
Recently, BYJU’S also raised $250 Mn from existing investors, including the Qatar Investment Authority. BYJU’S is also said to be in talks to raise $500 Mn through convertible notes as part of its pre-IPO funding. It has been looking to get listed on the US bourses via the SPAC listing.
