Byju’s, India's most-valued startup, has decided to put two of its key assets -- Epic and Great Learning -- on the block to generate $800 million-$1 billion in cash, with an aim to meet the edtech firm’s various commitments, including repaying the entire $1.2 billion term loan B (TLB) within six months, according to sources.
The cash-strapped company has proposed repaying $300 million of the $1.2 billion loan in the next three months, depending on whether the lenders accept Byju’s amendment proposal, said the people familiar with the development.
“This loan repayment proposal has been submitted to the lenders and conversations are going in the right direction,” said a person in the know.
“As part of that proposal, the plan is to liquidate assets like Epic and Great Learning to generate capital and turn around the business.”
The lenders have reportedly asked Byju’s for more information with regards to the loan repayment proposal.
TLB is a term loan by institutional investors with the prime goal of maximising their long-term returns.
Byju’s declined to comment on the matter.
In 2021, Byju’s was on an acquisition spree to grow rapidly in India and globally as the Covid pandemic accelerated the adoption of online education.
In July 2021, Byju’s acquired US-based digital reading platform Epic for $500 million, in a bid to expand its US footprint by getting access to 2 million teachers and 50 million children in Epic’s global user base.
The same month, the edtech firm bought Singapore-headquartered Great Learning, a global player in the professional and higher education segment, in a transaction valued at $600 million, comprising cash, stock, and earnout.
Byju’s has been working with bankers to sell the two assets and has received some interest, according to the sources.
However, it will be a challenge for the company to pull off the sale quickly and get at least the same amount for which it bought them in 2021 and repay the loan.
If the sale of the assets is successful, it will also help Byju’s manage its financials and solve other issues.
This includes negotiations with creditor Davidson Kempner and promoters of its tutoring service subsidiary Aakash Educational Services (AESL), which is in the mid of a shareholder tussle.
In November 2021, Byju's raised $1.2 billion in debt through a TLB from a group of overseas investors.
It raised the money to fund general corporate purposes offshore, including supporting business growth in North America.
In July 2022, the company said that it would soon announce its latest audited financials.
Its audited financial statements for the previous two financial years had not been filed with the Registrar of Companies.
In August 2022, the Ministry of Corporate Affairs asked the firm to explain why it hadn’t filed its audited financials for the year ended March 2021.
It also sent Byju’s parent company a letter asking them to explain the seventeen-month delay in filing audited accounts.
In September 2022, after an 18-month delay, Byju’s announced its audited results, where it booked losses of Rs 4,588 crore in FY21.
The losses were 19 times more than the preceding year.
The firm earned Rs 2,428-crore revenue in FY21.
However, in October 2022, Byju's raised $250 million from Qatar Investment Authority.
The valuation of the firm had remained static at $22 billion. In December 2022, a group of creditors asked Byju’s to immediately repay part of the TLB as they renegotiated the terms of the debt.
The group of creditors of Byju’s told the edtech firm to liquidate its assets in the US worth $500-800 million to repay part of a $1.2-billion loan, if the firm is not able to provide the money from its cash reserves, according to sources in the know.
The lenders hired Houlihan Lokey, a global investment bank that focuses on mergers and acquisitions, to advise them on amending covenants after Byju’s allegedly breached terms, according to the sources.
This included a September deadline for filing its results for the year ended March 31, 2022, the sources said.
Rothschild & Co., which provides global financial advisory, was representing Byju’s in the talks.
In March 2023, Byju’s reportedly offered to increase the rate of interest on its TLB as part of renegotiating debt-financing arrangements.
In April 2023, the lenders set a pre-condition to restructure TLB and as part of that, sought up to $200 million in prepayment along with a higher rate of interest from the firm.
In May 2023, Byju’s closed a Rs 2,000 crore ($250 million) round from Davidson Kempner Capital Management, a US-based investment firm, in a structured instruments deal.
Now Davidson Kempner is also not fully disbursing the loan as the US investment firm is reviewing the lending decision due to various issues, according to the sources.
These include the company losing its auditor and three board members in the same week, and the legal battles with the lenders in the US.
On July 22, Byju’s auditor Deloitte Haskins & Sells resigned from its role as the company was delaying filing financial results.
Following the auditor’s resignation, the firm’s top three investors — Prosus, Peak XV Partners, and Chang Zuckerberg Initiative — representatives also resigned.
After these resignations, Byju’s chief executive officer Byju Raveendran addressed shareholders and employees on the issue.
In June, Byju’s TLB creditors pulled out of negotiations with the company to recast the TLB.
The Bengaluru-headquartered company’s American entity Byju’s Alpha was sued in Delaware by an agent of lenders to whom the company owes $1.2 billion.
The lawsuit was filed by GLAS Trust Company and investor Timothy R Pohl against Byju’s Alpha, Tangible Play (Osmo), and Riju Raveendran.
The two companies being sued were units of Think and Learn Private, an edtech firm founded by Byju Raveendran.
The lenders reportedly accused the company’s entity, which has no employees, of hiding $500 million as part of a battle between the creditors and the edtech firm.
Byju’s filed a suit against US-based investment management firm Redwood to challenge the acceleration of the $1.2-billion term loan B (TLB) facility, and disqualify the lender for its “predatory tactics”.
Byju’s also skipped an interest payment of about $40 million on the loan.
The edtech firm argued that contrary to the conditions of the loan facility, Redwood purchased a significant portion of the loan while primarily trading in distressed debt.
Given that legal proceedings are now on in both Delaware and New York, the entire TLB is disputed, the company said in a statement.
In response to this, a group of ad hoc lenders, who collectively own more than 85 per cent of Byju's term loans amounting to $1.2 billion, said the recent lawsuit filed by the edtech firm in the Supreme Court of the State of New York County lacked merit.
The firm recently announced the appointment of accounting firm BDO as the company’s statutory auditor for the next five years.
It also announced the formation of an Advisory Council, on July 13. Former State Bank of India chief and current chairman of BharatPe Rajnish Kumar and former chief financial officer (CFO) of Infosys Mohandas Pai have joined Byju’s BAC (Board Advisory Committee).
Byju’s has raised total funding of $5.8 billion from investors like Qatar Investment Authority (QIA), Sumeru Ventures, Vitruvian Partners, BlackRock, Chan Zuckerberg Initiative, Sequoia, Silver Lake, Bond Capital, Tencent, General Atlantic, and Tiger Global.