Steep losses, high cash burn: Byju’s seeks more time to pay $1.2 bn | The Financial Express

Steep losses, high cash burn: Byju’s seeks more time to pay $1.2 bn

May sign loan forbearance deal with its lenders

Steep losses, high cash burn Byju’s seeks more time to pay Steep losses, high cash burn: Byju’s seeks more time to pay $1.2 bn.2 bn
Byju’s is in breach of the covenants of the $1.2 billion loan it took in November 2022. (File)

Edtech major Byju’s has sought more time from its lenders to renegotiate the terms of repayment of its $1.2-billion loan that is in breach of covenants, Bloomberg reported on Tuesday citing sources.

The report added that the edtech unicorn is likely to sign a loan forbearance agreement with its creditors, giving the firm time till February 10 to bargain better deal terms.

The Bloomberg report said that Byju’s has also offered to raise fresh equity capital and provide creditors a so-called quality of earnings report and cash verification statements by external auditors.

Byju’s is in breach of the covenants of the $1.2 billion loan it took in November 2022. It reportedly failed to provide its financial statements to the lenders according to the stipulated deadline as part of the loan covenant. Following this, a group of lenders who participated in the term loan pushed for faster repayment of part of the loan.

A few creditors who bought into the loan through primary holders in September have hired investment bank Houlihan Lokey to push for accelerated pre-payment of part of the loan. Last month, Byju’s also hired Rothschild & Co to represent it in the talks. The edtech major has been looking to restructure the loan due to mounting losses and high cash burn.

As reported by FE earlier, the new repayment terms can only be accepted if at least 51% of the lenders agree with the new terms and conditions of the loan. “If this condition is not met, such a large loan issue cannot be rewritten and this is the standard clause in any term loan issue. The company is, however, unlikely to agree to any request for pre-payment and the originally agreed loan repayment terms will be met,” a source told FE last month.

A spokesperson for Byju’s declined to comment on the story when contacted.

In November last year, Byju’s completed a $1.2-billion term loan B (TLB) raise with a five-year tenure. According to S&P Global, the term loan pledged a 6.78% yield to maturity rate but was an unrated issue. The terms of the loans dictated a nine-month period to get the issue rated, but it is unclear whether Byju’s has obtained a rating.

When Byju’s floated the TLB late last year, it was initially seeking to raise $500 million, mostly for funding capital requirements and for business development purposes. However, the round size was increased to $1.2 billion due to high demand. The term loan issue received strong demand from large investors, including banks, financial institutions and wealth funds. The loan’s arrangers include JPMorgan Chase & Co and Morgan Stanley.

The push towards an early repayment of the loans comes at a time when Byju’s is in the news for multiple rounds of layoffs and questionable accounting practices, which received scrutiny from its own financial auditor. Byju’s also came under scrutiny from the government and the ministry of corporate affairs after its FY21 financials were delayed by almost 18 months beyond the prescribed timeline.

Byju’s reported a loss of `4,564 crore in FY21. The financial statement showed the net loss saw an increase as promotion and employee expenses rose. Revenues fell 3.3% to `2,428 crore as it deferred about 40% of its revenue to subsequent years due to its new revenue recognition model.

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First published on: 11-01-2023 at 05:30 IST