Bengaluru: BYJU’s, a global ed-tech company, closed a deal of Rs 2,000 crore ($250 million) with Davidson Kempner Capital Management, a US-based investment firm, in a structured credit transaction in return for the cash flows of its test prep subsidiary Aakash Educational Services.

The deal, which closed on Friday, is a three-year loan facility with an equity-linked to Aakash’s IPO listing that BYJU’s plans to launch in the coming future, persons close to the matter told to the Economic Times.

Mode of transaction

People close to the matter said the transaction was raised through a combination of non-convertible debentures (NCDs) and a smaller portion of compulsorily convertible debentures (CCDs). These are linked to Aakash’s final valuation in the upcoming initial public offer (IPO), which amounts to a 12% annualised fixed discount rate for the firm.

The Bengaluru-based firm is raising the funds from the mix of equity and structured instruments, which this round happens to be a part of an ongoing $1-billion funding round.

Approx $700 million of the $1 billion is anticipated to be raised through equity, for which the ed-tech company is in discussions with existing and new investors. Which includes, investors like Abu Dhabi’s sovereign wealth fund ADQ.

Earlier, Byju’s was considering other investment firms such as Davidson Kempner Capital Management, Oaktree Capital Management, and Apollo Management, among others, but decided to move forward with Davidson Kempner, as per sources.

“Davidson Kempner Capital does very deep due diligence before investing,” said a person.

Funding’s Agenda

It is expected that the firm through this funding round, will be meeting its requirement to pay a portion of the $1.2 billion term loan B which it raised in 2021. It is also reported that the ed-tech firm has requested more time from its lenders to renegotiate an agreement governing a loan that is in breach of covenants, told the persons close to the matter.

The deal was closed when earlier, this year on April 29, The Enforcement Directorate (ED) raided the residence and workplace of Byju’s CEO Byju Raveendran. The reports told that the directorate had found “incriminating evidence” upon conducting raids under the Foreign Exchange Management Act (FEMA).