Byju’s, the renowned education startup in India, has chosen not to fulfil further payments on a $1.2 billion loan following a dispute with lenders. This intensifying conflict poses a potential threat to the future of one of India’s most successful startups.
According to sources familiar with the matter, Byju’s did not make a $40 million interest payment that was due on Monday. The company has stated in a June 6 statement that it has filed a complaint regarding the loan with the New York Supreme Court.
Byju’s referred to the $1.2 billion term loan B and stated, “Given that legal proceedings are now underway in both Delaware and New York, it is clear that the entire TLB is disputed. 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.”
Facing financial strain as the pandemic-driven online tutoring demand declined, Byju’s had been attempting to negotiate a loan restructuring agreement with its creditors. However, negotiations fell through as creditors demanded accelerated repayment.
As of 6 pm on June 5 in New York, the payment had not been made, according to anonymous sources. Some lenders are exploring options to address a potential payment default.
The loan’s value dropped to a low of 64.375 cents on the dollar on Monday, down from 78 cents on June 2, according to Bloomberg data.
Founded in 2015 by former teacher Byju Raveendran, the company, officially known as Think & Learn Pvt, became India’s most valuable startup over the past decade due to the surge in online education demand and several acquisitions. It attracted investments from Tiger Global Management, Mark Zuckerberg’s Chan Zuckerberg Initiative, Silver Lake Management, and Naspers Ltd. Byju’s 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 has disputed the notion that its decision not to make interest payments indicates financial difficulties. The company stated, “Byju’s remains financially robust with significant cash reserves” and expressed openness to discussions with the TLB lenders (Term Loan B).
