In another setback for the embattled edtech unicorn BYJU’s, its creditors have reportedly pulled out of negotiations with the startup to restructure its $1.2 billion loan.
The development comes after some of the creditors accused BYJU’s of hiding $500 million in funds raised. The lenders can now reportedly sell the firm’s term loan B (TLB) securities as the restraint that came as part of the negotiations has been lifted.
BYJU’s has denied the allegations and said that the transfer of $500 million from BYJU’S Alpha didn’t contravene any terms of the credit agreement and the agreed-upon rights and responsibilities.
The edtech unicorn raised the TLB of $1.2 billion in 2021. However, as the unicorn began renegotiations for the terms of the debt, the creditors asked it to immediately repay a part of the loan. Recently, the lenders also sought a prepayment of $200 million, along with a higher interest rate, as a precondition to restructure the TLB.
As per a Bloomberg report, BYJU’S is trying to reach out to all lenders independently to renegotiate the terms despite the creditors discontinuing the talks.
Meanwhile, BYJU’s needs to make an interest payment on the loan by June 5, people aware of the matter told the publication. On the other hand, BYJU’S lawyer said in a US court last month that it would get “a large capital infusion” soon, which would allow it to pay down the loan.
Last month, the edtech startup raised a debt funding of $250 million from the US-based alternative investment firm Davidson Kempner. As per reports, the company was also close to raising another $700 million from investors.
The problems for BYJU’s seem to grow with each passing day as the company’s three premises were recently raided by the Enforcement Directorate (ED) in connection with a Foreign Exchange Management Act (FEMA) probe. However, as per reports, the ED has not found any FEMA violations by the edtech startup.
Besides, BYJU’S has also seen many of its investors slashing its valuation, with the latest one being by BlackRock. The company is also yet to file its financial statements for the financial year 2021-22 (FY22). In FY21, it reported a 1,880% year-on-year (YoY) widened loss of ₹4,588 crore.
Amid the funding winter and slowdown in the edtech sector, BYJU’S has laid off over 4,500 employees since 2022.
The company’s troubles come at a time when the edtech sector is facing a funding winter. Several startups in the sector have been forced to lay off employees and cut costs.
The slowdown in the edtech sector is being attributed to a number of factors, including the rising cost of customer acquisition, the increasing competition from offline players, and the regulatory scrutiny.
It remains to be seen how BYJU’s will be able to navigate the current challenges and emerge as a stronger player in the edtech sector.