How $1.2bn loan became a concern for BYJU'S
The $1.2 billion loan it raised in November 2021 has turned out to be a massive headache for BYJU'S. The back-and-forth between the embattled edtech giant and its creditors has now reached the New York Supreme Court. The new lawsuit is on top of the one already pending in Delaware. Let's see how the loan has become a concern for BYJU'S.
BYJU'S raised $1.2 billion for more acquisitions
In 2021, BYJU'S opted to go the Term Loan B (TLB) route to raise funds. The aim of the fundraising was to prepare a war chest for more acquisitions. Although the company's original plan was to raise $500 million, it decided to go ahead with more than double that money. It was one of the largest unrated TLBs in the world.
BYJU'S delayed the announcement of its audited financials
The year 2022 was a tough one for BYJU'S, as the company struggled with the post-COVID economy. There were also questions regarding the company's delay in filing its audited financials. Especially after its auditor Deloitte raised concerns about how the firm recognized revenue. BYJU'S finally announced its FY21 results in September 2022 after an 18-month delay.
Some lenders asked BYJU'S to repay part of the loan
Under the loan agreement, BYJU'S was required to release its FY22 results by September 2022. It, however, didn't. This spooked the lenders. In December, some of the creditors asked the company to repay part of the loan. This happened while the company was seeking to restructure the loan. The small group of lenders asked BYJU'S to liquidate its US assets for repaying the loan.
BYJU'S agreed to pay higher interest to restructure the loan
Most of the creditors that asked BYJU'S to sell its US assets bought the debt from primary lenders. They aimed to make a profit from the accelerated repayment. Meanwhile, the creditors sought a higher interest to restructure the loan. In March, the company agreed to increase the rate of interest of the TLB. The increased interest was on top of the TLB's floating rate.
BYJU'S Alpha was accused of hiding $500 million
The standoff between BYJU'S and its creditors intensified after they filed a suit against the company's US arm, BYJU'S Alpha. The lenders sought to control BYJU'S Alpha. During the hearing in Delaware, the creditors accused BYJU'S Alpha of hiding $500 million by transferring it out of the company. The firm said it transferred the funds to protect the money from predatory lenders.
Lenders pulled out of debt restructuring negotiations
The company's restructuring efforts received another setback when the creditors decided to pull out of negotiations to recast the loan. The decision by lenders was influenced by the Delaware trial and the allegation that BYJU'S Alpha transferred $500 million out of the company. At the time, the firm said it will reach out to individual lenders to restructure the debt.
BYJU'S disqualified Redwood as a lender
When the lenders stopped loan restructuring negotiations, BYJU'S did not say anything about approaching the New York Supreme Court. In the lawsuit, the firm challenged the acceleration of TLB. It also sent a notice to Redwood, disqualifying it as a lender. The company attributed the notice to Redwood's predatory practices. It said Redwood purchased a significant part of the loan contrary to TLB's terms.
The company skipped the payment of interest
Meanwhile, the company skipped the payment of $40 million in interest that was due on Monday. "Given that legal proceedings are now on foot in both Delaware and New York, it is clear that the entire TLB is disputed," BYJU'S said. It has elected to not make any payments, including interest, until "the dispute is decided by the court."
