The conflict, dating back to June 5, saw BYJU’S file a case in the New York Supreme Court to stop the lenders from accelerating a $1.2 Bn loan
BYJU’S has been negotiating with the steering committee (SteerCo) of the term loan B, a group of lenders that own 85% of the $1.2 Bn credit line
Both parties are negotiating new terms, including upfront payments of $200 Mn and 12-13% interest, with a restructured tenure of 3-5 years
Edtech titan BYJU’S and its term loan B lenders have agreed to delay their ongoing legal battle in U.S. courts until October 6. This postponement will allow both parties time to negotiate an out-of-court settlement.
The conflict, dating back to June 5, saw BYJU’S file a lawsuit in the New York Supreme Court to stop the lenders from accelerating a $1.2 Bn loan. The lenders contended that BYJU’S had violated multiple covenants, including its failure to submit financial statements for FY22, consequently a demand for expedited loan repayment.
BYJU’S, in its lawsuit, also sought to disqualify Redwood Capital, a term loan B lender, citing its distressed investor status to claim that it was ineligible under the loan terms. The edtech giant also announced its decision to withhold interest coupons on the loan until the dispute was resolved but subsequently initiated negotiations with the lenders for an out-of-court settlement.
According to a document cited in a Mint report, the parties are working on reaching a forbearance agreement and discussions are still ongoing. “The parties agree it would further the efficiency interests of this case to allow additional time to facilitate a forbearance agreement,” the New York Supreme Court said in its August 24 order.
The court also allowed the lenders time till October 6 to either respond to the original lawsuit or move to dismiss it. While sources close to BYJU’S expect the dispute to be resolved before Diwali, no one has committed to any deadlines.
The New Terms
To be sure, BYJU’S has been negotiating with the steering committee (SteerCo) of the term loan B, a group of lenders that own 85% of the $1.2 Bn credit line. The parties had earlier said they would be signing new terms on August 3 but failed to do so.
Both parties are negotiating new terms, including upfront payments of $200 Mn and 12-13% interest, with a restructured tenure of 3-5 years, a person cited by Mint said.
BYJU’S raised a $1.2 Bn loan in November 2021. Lenders began pushing the firm for more disclosures as the company failed to disclose its audited FY22 financials on time, which was a ‘technical’ breach of covenants, according to company insiders.
Matters came to a head on June 5, when BYJU’S refused to pay interest on the loan and alleged that lenders had deployed ‘predatory tactics’. The situation became worse as the edtech’s board of directors and its auditor resigned expressing their inability to work with the company management.
Since then, it has formed an advisory council roping in Infosys cofounder Mohandas Pai and former SBI chairperson Rajnish Kumar.
The edtech giant is also working on repaying a loan taken from Davidson Kempner and onboarding Manipal founder Ranjan Pai as an investor in its offline business unit Aakash Educational Services. BYJU’S has also committed to filing its FY22 financial statements by September 30 and FY23 financials by the end of December.