BYJU'S may see $50M-60M yearly rise in interest cost on $1.2B loan under revised terms

BYJU'S may need to allocate an additional $50 million-$60 million per year for interest payments on its $1.2-billion term loan B (TLB) due to the new terms negotiated with lenders, according to a news report.

Proposed by BYJU’S, the interest rate falls within the range of 11-11.5%. This is, however, subject to potential changes, as discussions between the edtech firm and the lenders to finalise the terms continue through this week, The Economic Times reported.

Later this week, BYJU’S and the lenders are expected to present a formal proposal to expedite the finalisation of the new terms for the TLB, the report added.

YourStory has reached out to BYJU’S for a comment.

BYJU’S and its lenders were expected to finalise a term loan amendment before August 3, 2023.

Last month, the steering committee of ad hoc term loan lenders, who collectively own more than 85% of BYJU'S $1.2 billion TLB, had said in a statement that the successful execution of the amendment would immediately solve the loan’s acceleration and end all open litigation while avoiding further enforcement actions.

BYJU'S and the lenders have been involved in litigation against each other in the United States courts. In June, a consortium of ad hoc lenders termed BYJU'S lawsuit against them as "meritless" after the company challenged the acceleration of the loan at the New York Supreme Court. This action came a day after BYJU’S reportedly missed a quarterly interest payment of about $40 million on the loan.

BYJU’S Alpha, a wholly-owned subsidiary of the edtech unicorn, raised the loan in November 2021. It was the biggest TLB placed by an Indian startup at the time of the raise, but the loan was unrated.

BYJU’S secured the TLB at a Libor plus floating interest rate of 550 basis points, and the extra interest rate being deliberated upon by the edtech firm is in addition to the existing 550 bps. In March, Raveendran had proposed a heightened rate of approximately 200 bps, but this was not accepted by the creditors.

Over the past few months, finalising the new terms for the TLB has been a significant challenge for BYJU’S. This has been compounded by issues involving its test prep unit Aakash, TLB lenders, and concerns raised by investors, such as Prosus, about corporate governance matters, according to the report.

On Tuesday, it was reported that BYJU’S and US-based investment fund Davidson Kempner have started talks to address their dispute over a loan covenant breach linked to Aakash.

In May, the Bengaluru-based firm had raised $250 million (~Rs 2,000 crore) through structured instruments from Davidson Kempner against its shareholding in Aakash.