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Raveendran, the son of educators, launched his eponymous startup in 2015. Image Credit: Bloomberg

Mumbai: One of India’s best-known startups has skipped payment on a dollar loan, escalating a conflict with lenders that underscores the company’s mounting distress.

Byju’s, an education-technology company that provides services to more than 150 million students around the world, didn’t pay $40 million in interest due Monday on a $1.2 billion loan. The firm, led by former teacher Byju Raveendran, said in a statement that it has elected not to make further payments on the $1.2 billion so-called term loan B and that it filed a complaint concerning the facility to the New York Supreme Court.

“Given that legal proceedings are now on foot in both Delaware and New York, it is clear that the entire TLB is disputed,” the company said, referring to the term loan B, which is a kind of leveraged loan usually underwritten by banks and sold on to institutional investors. “As such, Byju’s cannot be expected to and has elected not to make any further payment to the TLB lenders, including any interest, until the dispute is decided by the court.”

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The development makes Byju’s one of the largest Indian startups ever to miss payment on a dollar loan. The company had been trying to strike a deal with creditors to restructure the facility, which itself is one of the biggest unrated term loan B offerings ever from a new-age economy company.

As the pandemic-era online tutoring boom tapered off, Byju’s finances were crimped. And creditors demanding an accelerated repayment scrapped long-running negotiations and sought recovery through the courts.

The loan slumped to a low of 64.4 cents on the dollar on Monday, down from 78 cents on June 2, according to data compiled by Bloomberg.

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The company had previously missed deadlines to file financial accounts, and its offices were searched earlier this year by India’s agency that investigates violations of the nation’s foreign-exchange policies.

A lawyer for Byju’s said in a US court last month that the company would get “a large capital infusion” soon that would allow it to pay down the loan. Byju’s had offered to increase the coupon on the loan due 2026 by as much as 300 basis points and prepay part of the debt to renegotiate the agreement after it missed a deadline to file audited financial results.

Raveendran, the son of educators, launched his eponymous startup in 2015. The firm, whose parent company is formally known as Think & Learn Pvt, grew into the most valuable of the country’s startups over the past decade through a surge in demand for online education and a series of acquisitions.

It drew investments from Tiger Global Management and Mark Zuckerberg’s Chan Zuckerberg Initiative, along with Silver Lake Management and Naspers Ltd. Byju’s had reached a valuation of $22 billion and had considered merging with a special-purpose acquisition company, or SPAC, to go public last year.

In its statement, Byju’s said it remains “financially robust with significant cash reserves and that “it remains open to discussions with the TLB lenders.”