BYJU’s lenders demand prepayment and higher interest rates amidst economic challenges and regulatory concerns
According to persons with first-hand knowledge of the subject, EdTech company BYJU’s lenders have asked up to $200 million (approximately Rs.1,600 crore) in prepayment combined with a higher rate of interest in order to restructure its $1.2 billion (Rs.9,600 crore) term loan B (TLB). According to the article, the Bengaluru-based business has offered to boost the interest rate by roughly 200 basis points (bps), but they are yet to agree on the prepayment condition proposed by the lenders, which includes a number of US-based hedge funds. One basis point equals a hundredth of a percentage point.
On March 20, ET reported that the company’s Founder, Byju Raveendran, has offered to raise the loan interest rate by 200-300 basis points. The renegotiation appears to have been spurred by a delay in releasing the company’s audited financials. BYJU’s 2020-21 profits were announced last year, following an 18-month wait. The corporation has yet to release its results for the fiscal year ending on March 20, 2022.
“The prepayment is becoming a sticking point in negotiations, with some lenders refusing to play ball.” However, it is feasible that the lenders may eventually agree to cut the number of payments,” one of the people named in the story stated.
BYJU’s, founded in 2011, is one of India’s most valuable startups, with a current valuation of $16.5 billion. The company offers online learning courses to students from Kindergarten to College and has seen a surge in demand during the pandemic as students turn to remote learning. However, the company has also faced criticism for its high prices and aggressive marketing tactics.
The proposed loan restructuring could help BYJU’s weather the current economic challenges and continue to grow its business. However, it also notes that the higher interest rate could increase the company’s debt burden and put pressure on its profitability in the long term.
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