In a bid to address its mounting debt challenges, leading edtech giant Byju's is actively considering the sale of two of its key assets. Simultaneously, the company is eagerly awaiting fresh equity funding to help alleviate its financial burdens. This strategic move underscores Byju's commitment to managing its financial health while retaining its position as a global leader in the education technology sector.
Asset Sale to Raise Immediate Funds
Byju's has initiated the sale of two of its subsidiary companies, Great Learning and Epic, which cater to higher education and digital reading for children, respectively. This decision has been prompted by the need to generate immediate capital to fulfil repayment obligations stemming from a substantial $1.2 billion Term Loan B (TLB) that the company procured from a consortium of US-based creditors.
Seeking a Feasible Solution
Exploring various financial options, Byju's appears to have concluded that an asset sale is the most practical choice at this juncture. This strategic manoeuvre aims to generate approximately one billion dollars, a substantial sum that will aid in meeting its financial commitments and stabilizing its financial position.
Strategic Acquisitions in 2021
Byju's had made strategic acquisitions in 2021, capitalizing on the surge in demand for digital education due to the COVID-19 pandemic. Notably, the company acquired Great Learning for $600 million and Epic for $500 million through cash and equity transactions. These acquisitions were pivotal in strengthening Byju's portfolio and expanding its reach.
Challenges Faced
Despite raising substantial capital during its rapid growth phase in 2020-2021, Byju's found itself with insufficient equity to support its ambitious acquisitions. Coupled with the ongoing operational expenses, the company opted to secure a significant term loan from US-based debt providers.
Debt Woes and Legal Battles
Byju's encountered trouble when it missed a $40 million loan repayment in June, sparking legal disputes with its lenders. These conflicts have led to renegotiations of interest rates, potentially raising them to 10-11 percent. Consequently, the company may need to allocate $100-120 million annually from its cash flow to meet these new terms, further complicating its financial predicament.
Repayment Proposal
Byju's recently presented a repayment proposal to its lenders, offering to clear the entire term loan in less than six months. Under this proposal, Byju's commits to repaying $300 million of the distressed debt within the initial three months, with the remaining amount settled within the subsequent three months. This proactive approach demonstrates Byju's determination to resolve its debt challenges swiftly.
In light of these developments, Byju's is navigating a complex financial landscape, striving to strike a balance between asset optimization and debt management. The edtech giant's actions reflect its commitment to maintaining its leadership in the dynamic world of education technology.
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