BYJU'S creditors stop $1.2 billion loan restructuring talks: Here's why
What's the story
BYJU'S, India's most valuable start-up, cannot seem to catch a break. Earlier this week, asset management company (AMC) Blackrock cut the edtech major's valuation by 62% year-over-year.
The latest setback came after its creditors decided to pull out of negotiations to restructure a $1.2 billion loan.
The decision by lenders adds to the firm's woes. It is also facing regulatory scrutiny.
Context
Why does this story matter?
BYJU'S has been the crown jewel of India's start-up ecosystem. The last few years have seen the company growing rapidly.
However, the post-pandemic economy has been challenging for edtech platforms like BYJU'S. The company is planning a comeback by raising a whopping $1 billion.
The tussle with creditors, therefore, comes at an unfortunate time for the firm.
Creditors
Creditors accused BYJU'S of hiding $500 million
The creditors' decision to call off loan recasting negotiations comes against the backdrop of an ongoing trial that involves BYJU'S US-based subsidiary Alpha.
In a hearing last month, the creditors accused BYJU'S Alpha of hiding $500 million by transferring it out of the company.
According to Bloomberg, the talks came to an end after that.
Transfer
Have a right to transfer money under loan agreement: BYJU'S
During the trial last month, BYJU'S Alpha's lawyer said the company transferred funds to protect it from predatory lenders. The attorney added that the company has a right to transfer money under the loan agreement.
The transfer of funds was in "full compliance of loan agreement and did not contravene any terms of the agreed-upon rights and responsibilities," a BYJU'S spokesperson said.
Next step
BYJU'S plans to reach out to individual lenders
The decision by the steering committee of lenders to end negotiations comes amid BYJU'S attempts at appeasing creditors by offering prepayments and better coupons on loans.
The company still plans to reach out to individual lenders to reach an agreement. BYJU'S is scheduled to make an interest payment on June 5.
Meanwhile, lenders can sell the company's term loan B (TLB) securities.
Fundraising
Company will use funds to 'pay down the loan'
It is unclear whether the conflict with creditors will affect BYJU'S attempts at raising $1 billion. It plans to raise $700 million through equity and the remaining via structured instruments.
Last month, BYJU'S Alpha's lawyer said the company will use the "capital infusion" to "pay down the loan."
BYJU'S is in advance talks with several US-based AMCs to raise funds.