BYJU’S, the prominent edtech player, and New York-based Davidson Kempner have commenced discussions to resolve their conflict arising from a breach of loan covenant by BYJU’S offline test prep arm, Aakash Educational Services Limited (AESL).
Proposed Settlement Offered by BYJU’S
As part of the settlement, BYJU’S has proposed repaying the borrowed funds along with the interest to Davidson Kempner. This offer effectively presents Davidson Kempner with an exit from their involvement with the edtech firm. Sources have indicated that these developments follow a protracted period of boardroom discussions.
Negotiations and Points of Contention
Negotiations between the two parties are still underway, and certain aspects remain unsettled. Davidson Kempner is seeking interest on the entire amount for a period ranging from one to two years. In contrast, BYJU’S founder Byju Raveendran has put forth a proposal for a quarter’s interest. The ongoing talks are centered around determining the precise payout terms.
Manipal Group’s Role in the Settlement
Simultaneously, it has been revealed that Ranjan Pai, Chairman of Manipal Group, is finalizing a substantial $80 million investment in Aakash. This investment is intended to facilitate the repayment to Davidson Kempner. Furthermore, Byju Raveendran is expected to transfer Aakash’s shares to Pai in exchange for the investment.
BYJU’S Background and Ongoing Developments
The conflict between BYJU’S and Davidson Kempner originated from a structured credit deal worth $250 million signed earlier in May. This deal was based on Aakash’s cash flow, but only a fraction of the funds were received by BYJU’S. The breach of the loan covenant triggered talks to return the funds, and Davidson Kempner reportedly restructured Aakash’s board of directors.
Meanwhile, BYJU’S is simultaneously engaging in discussions with the steering committee of its $1.2 billion Term Loan B to establish new terms. The committee, owning the majority of the loan, aims to finalize the terms after extensive conversations with BYJU’S. The edtech giant has also approached Aakash’s founders and investment fund Blackstone, urging them to honor the pending stock swap component of a deal announced two years ago. However, opposition from the Chaudhry family and Blackstone has surfaced due to perceived breaches of terms, including delayed financial disclosures.
In light of these developments, BYJU’S leadership has reassured shareholders of timely financial reporting. They have committed to filing audited financials for FY22 by September and audited FY23 results by December, aiming to address concerns related to transparency and compliance.
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