Byju’s began to experience financial difficulties in 2022. The company’s valuation fell sharply, and it was forced to lay off employees. In addition, Byju’s was unable to meet some of the covenants in its loan agreement.
New Delhi: India’s most valuable edtech company, Byju’s, has tentatively agreed to rework its loan pact with lenders who collectively own more than 85 per cent of its $1.2 billion Term B loan, the Economic Times reported quoting people familiar with the matter. The announcement is expected early on July 24.
The lenders and Byju’s have agreed to work collaboratively toward a signed and completed term loan amendment by August 3, 2023. If the loan terms are successfully renegotiated, the creditors will cease to demand accelerated repayment. More importantly, all ongoing litigation could be resolved without the lenders initiating enforcement actions.
The agreement comes as Byju’s has been engulfed in a series of crises, including the resignation of its auditor and the resignation of its three key investors from the board. Byju’s differences with lenders over the $1.2 billion TLB have emerged as a key pain point.
The Loan Agreement
The $1.2 billion Term B loan was originally signed in 2020, when Byju’s was valued at $16.5 billion. The loan was used to finance Byju’s acquisition of WhiteHat Jr., an online coding platform for children.
The loan agreement included a number of covenants, or conditions, that Byju’s was required to meet. These covenants included maintaining a minimum level of debt-to-equity ratio, providing regular financial updates to lenders, and filing audited financial statements on time.
The Crisis
Byju’s began to experience financial difficulties in 2022. The company’s valuation fell sharply, and it was forced to lay off employees. In addition, Byju’s was unable to meet some of the covenants in its loan agreement.
As a result, the lenders began to demand accelerated repayment of the loan. Byju’s resisted these demands, and the two sides eventually agreed to renegotiate the loan terms.
The New Agreement
The new agreement is still being finalized, but it is expected to include a number of changes. These changes are likely to include:
- A lower interest rate on the loan
- A longer repayment period
- A reduction in the amount of debt that Byju’s is required to maintain
- The new agreement will also likely include provisions that address Byju’s corporate governance practices. These provisions are likely to include requirements for more independent directors on the board and for more transparency in financial reporting.
The implications of the agreement
The agreement is a positive development for Byju’s. It will help the company to avoid defaulting on its loans and to resolve its ongoing litigation with lenders. The agreement will also give Byju’s some breathing room to address its financial problems and to improve its corporate governance practices.
However, the agreement does not solve all of Byju’s problems. The company still faces a number of challenges, including the need to raise new capital and to regain the trust of investors.
