Edtech company Byju’s and its term loan B lenders have decided to postpone an ongoing disagreement in the US courts until 6 October. This extension aims to provide more time to achieve an out-of-court resolution, according to a document seen by Mint.
This conflict can be traced back to 5 June, when Byju’s lodged a case in the New York Supreme Court. The objective was to stop the lenders from accelerating a $1.2 billion loan. The lenders contended that Byju’s had violated multiple covenants, including its failure to submit financial statements for FY22, consequently seeking expedited loan repayment.
In its complaint, Byju’s also sought to disqualify Redwood Capital, a term loan B lender, citing its distressed investor status to claim that it was ineligible under the loan terms.
Byju’s also announced its decision to withhold interest coupons on the loan until the dispute was resolved, but subsequently initiated negotiations with the lenders for an out-of-court settlement.
The parties are working on reaching a forbearance agreement, and “discussions are still ongoing,” the court said in its 24 August order. “The parties agree it would further the efficiency interests of this case to allow additional time to facilitate a forbearance agreement.”
The court also allowed the defendants (lenders) time till 6 October to either respond to the original complaint or move to dismiss it. A person aware of the development said: “This dispute is likely to be resolved before Diwali (13 November), but no deadline has been set.”
Both parties are negotiating new terms, including upfront payments of $200 million, and 12-13% interest, with a restructured tenure of 3-5 years, the person added.
On 31 August, the loans were trading at 52.68 cents a dollar, according to Bloomberg.
Byju’s, seen as the bellwether for the sector, raised $1.2 billion loan in November 2021, at low rates. Lenders began pushing the firm for more disclosures as the company failed to disclose its audited FY22 financials on time, which was a ‘technical’ breach of covenants, according to company insiders.
Matters came to a head on 5 June, when Byju’s refused to pay interest on the loan, and alleged that lenders had deployed ‘predatory tactics’. The situation soured further as Byju’s board of directors and its auditor resigned expressing their inability to work with the company management.
Subsequently, it formed an advisory council roping in Infosys co-founder Mohandas Pai and former SBI chairperson Rajnish Kumar. Since then, Byju’s adopted a more conciliatory approach to work with its lenders. In July, the lenders said they expect to resolve outstanding issues by 3 August, but failed to reach an agreement.
The company is also working on repaying a loan taken from Davidson Kempner and on-boarding Manipal Health Enterprises founder Ranjan Pai as an investor in its unit Aakash Educational Services. The company said it will file its FY22 financial statements by 30 September and FY23 financials by December-end.
Byju’s and its lenders did not respond to queries.
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Updated: 31 Aug 2023, 11:49 PM IST
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