The clause has yet to be accepted by the edtech company, and lenders want updates on the company's cash status every two weeks. Byju has around Rs 1,500 crore in liquid assets in India and $650 million in foreign accounts.
To restructure Byju's $1.2 billion (Rs 9,600 crore) term loan B (TLB), which is currently being reviewed, Byju's lenders have demanded up to $200 million (roughly Rs 1,600 crore) in prepayment as well as a higher rate of interest from the Bengaluru-based company.
However, according to the persons, despite Byju's offer to increase the interest rate by 200 basis points (bps), it has yet to agree to the prepayment condition proposed by the lenders, which includes several US-based hedge funds. One-hundredth of a percentage point is called a basis point.
Byju Raveendran, the company's creator, has promised to raise the loan interest rate by 200-300 basis points, according to a March 20 article from ET. The company's delayed publication of its audited financials was the impetus for the renegotiation.
Byju didn't make its results for the fiscal year that ended in March 2022 public until last year, after an 18-month delay. "The prepayment is becoming a sticking point in discussions since some lenders aren't cooperative.
However, it's feasible that the lenders would eventually agree to lower the prepayment amount, according to one of the people who wished to remain anonymous.
New financing to restructure some loans
Byju may use its new capital round to restructure some of its TLB debt. However, the number could be smaller, according to a different person with knowledge of the discussions.
"A prepayment of $200 million was discussed, but it might end up being less. The company is prioritizing its funding arrangement to refinance part of its debt, according to a person close to Byju who spoke anonymously. However, discussions remain ongoing.
According to the people, the lenders also requested that the corporation produce fortnightly reports on its financial status. According to those briefed on the situation, Byju now has $650 million in its offshore accounts and roughly Rs 1,500 crore (almost $183 million) stashed in liquid money in India.
Byju is also close to concluding a $600-700 million investment round using a combination of convertible notes and equity. Both new and current donors are anticipated to contribute to this financing round.
A business can purchase short-term debt that converts to equity through convertible notes without giving the business a new valuation. Typically, these investors receive a discount on the subsequent investment round or a public offering.
According to the above source, most of the additional capital is anticipated to be raised through equity financing at the same $22 billion valuation. The remainder comes from convertible notes connected to a potential liquidity event.
The person added that the firm's cash position has been stable for the previous few months. "Lenders have engaged investment bank Houlihan Lokey while Byju's has appointed Rothschild & Co as an advisor to steer the negotiations," the source said.
This has reassured the lenders that the company can continue operating without depleting its reserves. According to a second individual knowledgeable of the situation, Byju's had hoped to finalize the new agreement for its TLB by the end of March. Still, negotiations over some previously mentioned conditions have caused a delay.
At the moment, Byju is worth $22 billion. It was reported that it had completed a $250 million investment round at the same valuation in October of the previous year.
According to a third source familiar with the discussions, Byju is "finalizing the round after months of negotiations amid constant scrutiny on its corporate governance practices, in addition to enforcing cost-cutting measures to stem the loss."
The Edtech company's losses for 2020–21 increased from Rs 262 crore to Rs 4,588 crore. The company's readjusted operating revenue was Rs 2,280 crore, a dramatic 48% decrease from the predicted operating revenue of roughly Rs 4,400 crore stated in the parent company Think & Learn Pvt Ltd's unaudited results.
Think & Learn Pvt Ltd is the business that owns and operates Byju's brand.
CFO appointment and valuation reduction
Ajay Goel, a former executive with the Vedanta group, was recently named Byju's new chief financial officer. The appointment's timing is essential since Byju must conclude talks for its $1.2 billion TLB, one of the most significant loans obtained by an Indian company.
Goel will collaborate on strategy creation, capital planning, and financial analysis with the founders and senior executives. Raveendran said that his strategic thinking and financial acumen would be instrumental in helping them create even more value for our stakeholders," on April 3.
One of Byju's investors, BlackRock, has reduced the value of its interest in the company by about 50% to just over $11 billion, ET had previously reported. This is a symptom of values relaxing in the face of challenging macroeconomic conditions and a restart in the edtech industry following the slowdown in Covid-19's spread.
Byju's new funding would be invested in already-existing companies like Aakash Institute and Great Learning, even if it has halted advertising for its coding division. WhiteHat Jr will be purchased in a $300 million deal in 2020.
It had invested about $2 billion in acquisitions by 2021 to expand its K–12, exam preparation, and higher education offerings. Currently, WhiteHat Jr. makes up less than 10% of Byju's total revenue.
I enjoy marketing, technology and business. I help businesses and brands connect with their ideal customer profiles and build products that excite them and solve their problems.