US-Based Kempner Reviews $250 Million Loan To Edtech Start-Up Byju's Amid Crises: Report

Byju’s is reviewing its lending decision after the company lost its auditor and three board members in the same week, raising questions about its accounting practices

Davidson Kempner's decision to hold back funds poses a fresh headache for Byju's that is trying to boost investor confidence through a proposed $1 billion fund raise.

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Davidson Kempner Capital Management isn’t fully disbursing a $250 million loan it had extended to the edtech start-up Byju’s as the US hedge fund reviews the lending decision in light of an escalating crisis at the company, citing sources familiar with the matter news agency Bloomberg said. The fund, which manages more than $38 billion, has given out less than half of the $250 million of convertible debt it had offered the start-up as some loan agreement covenants weren’t met, the people said, asking not to be named as the information isn’t public, according to the report.

Byju’s is reviewing its lending decision after the company lost its auditor and three board members in the same week, raising questions about its accounting practices.

The US firm’s decision to hold back funds poses a fresh headache for the company that is trying to boost investor confidence through a proposed $1 billion fund raise. Byju’s has also skipped payments on a $1.2 billion term loan and triggered a legal fight with creditors seeking quicker repayment. Spokespersons for Davidson Kempner and Byju’s declined to Bloomberg’s request for comment.

The firm, valued at $22 billion in its latest funding round, has been facing problems since it missed several deadlines to file audited financial accounts. The company has also been laying off thousands of employees as it seeks to cut costs.

Representatives of three influential backers — Peak XV, Prosus NV and the Chan-Zuckerberg Initiative — quit Byju’s board in the same week that Deloitte Haskins & Sells resigned as its auditor, underscoring a rapid erosion of trust within the company’s ranks.

Meanwhile, Byju's is in advanced discussions with prospective new shareholders for a $1 billion fundraising round in an attempt to sidestep a revolt by some investors. The edtech start-up is offering benefits to the potential investors, including preferential treatment in the case of liquidation. Its auditor Deloitte said it was severing ties with the start-up over its "long-delayed" financial statements for the year ended March 2022.