News Update

BYJU’S and Davidson Kempner in Discussions to Resolve Loan Covenant Breach Dispute

• ByStartupStory     |    August 8, 2023

Edtech company BYJU’S and US-based investment fund Davidson Kempner Capital Management are reportedly engaged in discussions to reach a resolution regarding a loan covenant breach related to BYJU’S test prep unit, Aakash Educational Services Ltd (AESL). The disagreement arose after BYJU’S raised $250 million (~Rs 2,000 crore) through structured instruments from Davidson Kempner in May, using its shareholding in Aakash as collateral.

Reports suggest that BYJU’S has proposed repaying the loan along with interest, while Davidson Kempner is seeking extended interest on the entire loan amount for one to two years, differing from BYJU Raveendran’s proposed quarter. Approximately Rs 800 crore was received by BYJU’S from the loan, with over Rs 600 crore utilized from the credit facility, according to sources.

The ongoing discussions are centered around determining an agreeable payout amount, potentially reaching a settlement between the two parties. Davidson Kempner aims to recover its funds from BYJU’S and bring the matter to a close. Both BYJU’S and Davidson Kempner have been approached for comments, but no official statements have been provided at this time.

Aakash Educational Services Ltd (AESL) has minority stakeholders, with the Blackstone Group and the Chaudhry family collectively owning 30% of the test prep unit. BYJU’S parent company, Think & Learn Pvt Ltd, holds a 43% stake, while founder Byju Raveendran maintains a 27% stake. Raveendran is reported to have offered a portion of his equity in Aakash as collateral for the loan.

In an effort to address governance concerns and allegations of financial misconduct, Davidson Kempner initiated the reconstitution of Aakash’s board, introducing at least four new independent and nominee directors to the test prep unit.

As negotiations continue, BYJU’S is also preparing to engage in discussions with lenders to formalize and execute new agreements for a $1.2-billion term loan B. The company and its lenders are expected to finalize a term loan amendment before August 3, 2023.

Additionally, it was noted that BYJU’S is progressing with its annual audit procedures. The FY22 audit is projected to conclude by the end of September, while the FY23 audit is scheduled for completion by the end of December. In the fiscal year 2021, BYJU’S reported a loss of Rs 4,564.38 crore, a notable increase from its FY20 loss of Rs 305.5 crore.

 

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