Byju’s, an education startup and one of India’s prominent startups, has decided to halt further payments on a $1.2 billion loan following a dispute with lenders. The conflict has escalated, raising concerns about the future of the company. Byju’s failed to make a $40 million interest payment due on Monday, according to sources familiar with the matter. In response, the company filed a complaint regarding the loan with the New York Supreme Court on June 6.
Byju’s stated that legal proceedings are underway in both Delaware and New York, indicating that the entire term loan B (TLB) is now in dispute. Consequently, the company has chosen not to make any further payments to the TLB lenders, including interest, until the court resolves the dispute. Byju’s had been engaged in negotiations with creditors to restructure the loan after its financial position was affected by the decline in demand for online tutoring during the pandemic. However, talks collapsed when creditors demanded an accelerated repayment.
As of June 5, the payment had not been made, and some lenders are exploring options to address a potential payment default. The loan’s value fell to 64.375 cents on the dollar on June 7, down from 78 cents on June 2, according to Bloomberg data. Byju’s had previously missed deadlines for filing financial accounts, and its offices were searched by India’s agency responsible for investigating violations of foreign-exchange policies.
Founded in 2015 by Byju Raveendran, a former teacher, the startup has become India’s most valuable startup over the past decade. Byju’s experienced rapid growth due to the surge in demand for online education and a series of acquisitions. It received investments from Tiger Global Management, Mark Zuckerberg’s Chan Zuckerberg Initiative, Silver Lake Management, and Naspers Ltd. The company reached a valuation of $22 billion and had considered going public through a merger with a special-purpose acquisition company (SPAC) last year.
Byju’s asserted that its decision not to make interest payments does not indicate financial difficulties. The company stated that it remains financially robust with significant cash reserves and is open to discussions with the TLB lenders. The outcome of the dispute and the resolution of the loan issue will likely have significant implications for Byju’s and its future prospects as it navigates the challenges in the education technology sector.
