Byju’s secured a USD 1.2 billion TLB (term loan B) in November 2021. It is now negotiating with its creditors to offer a higher interest rate on the loan as part of changes to the debt financing arrangement.
Byju’s negotiations to give a higher interest rate are the result of lenders recalling loans caused by a delay in providing audited financials for FY 21. The modifications are also related to the FY22 financials, which have yet to be filed with the Registrar of Companies (RoC). The loan term expires in 2026, and the shift in interest rates does not imply that Byju is in default.
Lenders of Byju’s have triggered a loan covenant breach, similar to the one for failing to file audited financial reports on time. Covenants define the terms and conditions of a borrower’s and a lender’s lending policies.
According to the media repots, the most valuable Indian startup, valued at USD 22 billion, has held negotiations with creditors about boosting interest rates by at least 200-300 basis points (bps). The TLB was hiked by 550 basis points at Libor + variable interest rate. Byju’s proposed increased interest rate is in addition to the 550 basis points. A basis point is equal to 0.01 per cent point.
This funding was obtained by Byju’s for acquisitions and expansion in the North American market. Nonetheless, in light of the current macroeconomic conditions, the corporation is under pressure to improve its financials and is limiting fresh investments. Its future purchases in the United States have also been placed on hold.
While renegotiating the TLB agreement, Byju’s is completing a fresh funding round using convertible notes.
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