In a major blow to Byju’s, India’s most valuable startup, creditors have abandoned negotiations to restructure a $1.2 billion loan, posing a significant setback for the embattled tech firm. The creditors resorted to legal action, accusing Byju’s of concealing $500 million in raised funds, leading to the breakdown of talks. With the lifting of the restraints that were in place during negotiations, lenders now have the option to sell the term loan B securities of the company.
This development presents a fresh challenge for Byju’s, as it strives to address its creditor concerns by offering prepayments and higher coupons as part of the loan restructuring. Despite the discontinuation of talks by the lenders’ steering committee, the company will make independent efforts to engage with each lender in a bid to renegotiate the terms.
Byju’s faces the imminent task of making an interest payment on the loan by June 5. However, the company’s legal representative assured a US court last month that a substantial capital infusion is expected soon, enabling the timely repayment of the loan and denying any allegations of fund concealment.
In response to the lenders’ withdrawal from the negotiations, Byju’s remained tight-lipped, declining to provide a comment on the matter. Likewise, representatives from Houlihan Lokey Inc., the firm hired by creditors for loan restructuring advice, refrained from commenting on the issue.
Notably, Byju’s had proposed increasing the coupon on the loan due in 2026 by up to 300 basis points and offering partial debt prepayment as part of the renegotiation process after failing to meet the deadline for filing audited financial results.
The loan, regarded as one of the largest unrated debts raised by a startup, experienced a significant decline, falling to a record low of 64.5 cents on the dollar in September. Presently, it is quoted at approximately 79 cents, reflecting the challenges faced by Byju’s in its financial restructuring journey.