BYJUS is offering to pay a higher interest rate for its $1.2 bn loan

According to a report, the edtech giant is in discussions with creditors on boosting the interest rate by at least 200-300 basis points (bps) as part of renegotiating debt-financing arrangements. This comes after the company triggered a breach of loan covenants by failing to furnish audited financials for the year ended September 2022 on time, media reports said.

Byju’s, struggling with losses and cash burn issues, had floated its $1.2 billion term loan in November 2021 at Libor plus a floating interest rate of 550 bps in a round that attracted banks, financial institutions, and wealth funds. The company had hoped to raise at least $500 million in the round but failed to do so.

Sources cited by ET say BYJUS seeks to amend its term loan agreement in the final stages. It has engaged several individual advisors and law firms in the talks and aims for a 200-250 bps increase in its interest rate.

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The company’s board is reportedly reviewing the proposal for changes in its debt arrangement, based on a recommendation from chief executive Byju Raveendran. The talks are in the final stages but do not have a firm timeline; sources told ET.

A renegotiated loan agreement would need approval from at least 51% of lenders, the standard condition in such huge loan issue deals. If this is not met, the new repayment terms cannot be accepted, and the agreed initial loan repayment criteria will be satisfied.

Byju’s is negotiating the change with lenders to avert any default in paying off the loan, people familiar with the matter said. The sources said the company has offered to raise the interest rate by 300 bps if lenders consented by February 15 or 200 bps if they signed on to a renegotiated deal by that date.

But some creditors are pushing back against the offer, citing reasons that include the need to have a clear plan to repay the loan quickly and the possibility of Byju’s renegotiating the terms of its debt. The group is also displeased with the fact that the company has not increased its equity funding per the term loan terms.

As part of the renegotiated deal, the company is committing to increase its equity funding and provide creditors with high-quality earnings reports from external auditors. The sources said it has also pledged to provide monthly business updates and hire a chief financial officer.

The move comes in the wake of lenders having recalled loans to Byju’s triggered by a delay in furnishing audited financials for the year ended September 21, a move related to the pending filing of its FY22 results, which are yet to be filed with regulatory bodies in India.

The company seeks to restructure its loan as it struggles with steep losses and meets cost reduction targets. Some creditors have hired Houlihan Lokey to push for faster repayment, while others are seeking to use a portion of Byju’s US unit’s cash reserves to prepay the loan, Bloomberg News reported earlier this month.

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