Oyo Hotels Seeks Financial Lifeline, Enters Talks with Apollo for $660M Loan Refinancing Amid IPO Delays
Oyo's Financial Reimagining, Extending Loan Maturity with Apollo as IPO Takes Unexpected Turns
6 October 2023
Oyo Hotels is in talks with Apollo Global Management Inc. to refinance a $660 million loan, seeking to extend its maturity to five years from the original 2026 deadline.
This move follows Oyo's recent announcement of its first-ever annual profit and positive outlook from Fitch Ratings, highlighting its resilience amid the travel industry's recovery.
Oyo's prolonged IPO journey, initially aimed at reducing debt, has faced delays, with the company's founder, Ritesh Agarwal, working towards a public listing, backed by Softbank Group Corp. and Airbnb Inc.
Oyo Hotels, once India's unicorn darling, is currently in discussions with Apollo Global Management Inc. to refinance a $660 million loan as the company faces delays in its initial public offering (IPO). According to a Bloomberg report, the parent company of Oyo, Oravel Stays Pvt, is looking to extend the loan's maturity to five years, compared to the original 2026 deadline. The negotiations, although currently private, could yield a decision as early as next month.
This development comes after Oyo's recent milestone of reporting its first-ever annual profit and optimism from Fitch Ratings regarding improved earnings as the travel industry gradually recovers. Oyo made history as the first Indian unicorn to secure debt from foreign institutions, initially offering generous terms and maintenance covenants - a customary practice among firms deemed risky by investors.
An Oyo spokesperson clarified, "Due to an increase in profits, we regularly get approached for cheaper financing options, but the company’s board hasn't approved anything, including prepaying some portion." It's important to note that there is no final decision on the refinancing terms at this point. Oyo's loan is currently trading at 101.50 cents on the dollar, according to Bloomberg data.
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The IPO journey for Oyo has proven to be longer than anticipated. The proceeds from the IPO were expected to help the lodging-booking company reduce its debt rather than seeking refinancing. The founder of the firm, Ritesh Agarwal, has been striving for years to bring Oyo to the public markets. Softbank Group Corp., which owns 47% of the company, and Airbnb Inc. are among its prominent backers. The startup had announced the filing of fresh IPO documents on April 1, 2023, without disclosing specific financial details, including the amount sought and the names of advisers.
Oyo, once valued at approximately $10 billion and often compared to India's Airbnb equivalent, had originally aimed to raise ₹84.3 billion in its initial IPO effort in 2021. However, the global downturn in technology valuations prompted multiple delays in its IPO plans, and the company has since faced challenges in managing its debt while navigating the path to going public.
As Oyo continues to navigate its IPO journey, the refinancing discussions with Apollo Global Management Inc. underscore the company's determination to address its financial challenges and position itself for success in the evolving travel and hospitality landscape.