Byju’s Scrambles to Pay $40 Million as $1.2 Billion Loan Deadline Looms
Byju’s Takes Action, $40 Million Quarterly Interest Payment to Tackle Financial Woes
5 June 2023
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Kunal Tyagi
Byju’s, the Indian edtech firm, faces a critical deadline for a $1.2 billion loan payment.
Failure to make the $40 million quarterly interest payment by June 5 would result in a loan default.
Negotiations to restructure the loan collapsed after creditors demanded accelerated repayment, exacerbating Byju’s financial challenges.
Byju's, the highly valued Indian edtech company, is confronting mounting pressure as it approaches a critical deadline for a $1.2 billion loan repayment. The company's financial challenges have been a prominent issue, and a failure to meet this deadline would result in a default on the loan. Despite engaging in negotiations with creditors to restructure the loan, recent breakdowns in talks have raised concerns.
On June 5, Byju's is anticipated to fulfill a quarterly interest payment of $40 million for its $1.2 billion loan. Failure to meet this deadline would trigger a default on the loan. While the situation remains fluid and plans could undergo changes, sources familiar with the matter have confirmed the forthcoming payment.
Byju's had been actively involved in discussions with creditors to restructure the largest unrated debt by a startup ever—a $1.2 billion loan. However, negotiations recently faltered when creditors insisted on accelerated repayment. The consortium of lenders has entered into a cooperation agreement to collaborate collectively during negotiations, further complicating the situation.
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The decline of the pandemic-driven surge in online tutoring has dealt a significant blow to Byju's financial standing. Byju Raveendran, the company's founder and CEO, had been seeking a restructuring deal for the loan and even proposed a higher interest rate. Unfortunately, talks eventually disintegrated, exacerbating the company's financial challenges.
A default on the $1.2 billion loan would have severe consequences for Byju's, potentially leading to further financial turmoil and reputational damage. Currently, Byju's is quoted at approximately 78 cents on the dollar, indicative of the concerns surrounding its financial stability.
Timely payment of the coupon would provide Byju's with some breathing room as it awaits a "large capital infusion." The company's legal representative has indicated that this infusion will be utilized to pay down the loan. Byju's emphasizes its commitment to remaining current on all debt payments and urges any defaults to be viewed as technical breaches rather than a lack of willingness to fulfill obligations. It is worth noting that Byju's has faced scrutiny and criticism in recent times. The company garnered negative attention for announcing workforce reductions and encountered allegations of malpractices by its sales team. Additionally, Byju's has missed deadlines for filing financial accounts, and its offices were subjected to searches by India's agency responsible for investigating violations related to foreign exchange policies.
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