BYJU'S Commits to Higher Interest on $1.2Bn Term Loan
Edtech Major Braces for New Debt Structure with Up to 250 Basis Point Interest Hike
21 March 2023
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Jayashri Ghorpade
With a 200-250 bps increase in interest rate, the edtech major may finalize the new debt structure.
In November 2021, BYJU'S raised the TLB at a floating interest rate of 550 bps in addition to Libor (London Inter-Bank Offered Rate)
Looking to raise up to $500 Mn via convertible notes, the edtech giant is continuing to negotiate to restructure its debt.
Reportedly, BYJU'S, the edtech decacorn, is offering to increase the interest rate on its $1.2Bn term loan B (TLB) as it negotiates debt-financing arrangements, with sources cited by ET stating that the company may finalize the new debt structure with a 200-250 bps hike in interest rate.
BYJU'S, the edtech giant that has recently been cutting costs, raised its TLB in November 2021 at Libor (London Inter-Bank Offered Rate) plus a floating interest rate of 550 bps. However, the company is now seeking to increase this interest rate, which would raise the total floating interest rate to 750-800 bps. The term loan, which is due in 2026, is reportedly not in default at BYJU’S end despite the interest rate change. Byju Raveendran, the founder of BYJU'S, is said to be directly involved in the renegotiation talks. Current discussions suggest that the decacorn is expected to finalize the new terms within the next two weeks.
Last December, media reports indicated that the edtech major, BYJU'S, was seeking more lenient terms on the loan. Shortly after, some creditors reportedly demanded faster loan repayment, seeking a profitable exit at the time. This development now highlights BYJU'S commitment to paying a higher interest rate on the $1.2Bn term loan.
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The delay in posting FY21 financials and continued delay in posting FY22 financials have prompted creditors to request a quicker payment and led to the renegotiation. It was previously reported that the TLB agreement required the reporting of FY22 financials by September-end.
After a delay of 18 months, the edtech major filed its 2020-21 financial statements on September 14. However, a similar story is unfolding for its FY22 financials, as it has been nearly 12 months since the financial year ended, and there are still no clear timelines for the results. This lack of information has raised questions among all stakeholders.
While negotiating to restructure its debt, the edtech giant is aiming to raise up to $500 Mn through convertible notes, according to people familiar with the matter, although the funding size is still subject to change. The company had initiated discussions for the additional funding during a $250 Mn funding round in October 2022 from existing investors like Qatar Investment Authority (QIA).
Despite BYJU'S ongoing efforts to raise capital, the edtech giant has not achieved profitability and reported a loss of INR 4,588 Cr in FY20, which is almost 20 times higher compared to FY19. In September last year, Raveendran announced that BYJU'S, Aakash, and Great Learning would become profitable on a standalone basis by the end of FY23, and the CEO reaffirmed in December that the company aims to achieve group profitability in FY23.
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