SoftBank-backed Oyo Hotels is looking to raise a $600 million loan, following the ravaging second wave of coronavirus in the country that impacted its recovery plans. The company is offering unusually generous terms to investors as it looks to raise the loan.
Parent company Oravel Stays Pvt is discussing a five-year term loan B at 850 basis points over LIBOR (London Inter-bank Offered Rate), as mentioned in a report in Bloomberg.
This is higher than the usual guidance given for recently issued term loan Bs in Asia-Pacific market. Oyo’s loan also features maintenance covenants usually included only for companies that are considered risky by investors.
The company is scheduled for a lender call on May 21, and commitments for the loan are due by June 2. JPMorgan Chase & Co is arranging the deal.
Valued most recently at $10 billion, Oyo is one of the largest startups in Softbank Group’s portfolio. However, its business has taken successive hits due to the spread of coronavirus and its impact on travel. Additionally, operational missteps left a foul taste in the mouth of hotel owners.
Softbank’s billionaire founder Masayoshi Son backed the global expansion of the company and has been a mentor to Agarwal. Son had personally guaranteed loans from financial institutions like Mizuho Financial Group Inc when Agarwal borrowed $2 billion to buy shares in his own company as valuation rose.
Agarwal, as recently as March, told employees that its India business was growing and that it was earning the same gross profit in dollars in January 2021 as it did a year ago before the virus hit. However, the resurgence of the virus in India severely impacted recovery for travel and tourism sector.
Oyo has raised venture capital from investors including SoftBank, Greenoaks Capital and Lightspeed India. Its latest valuation places it third among India’s most valuable startups, behind education-technology provider Byju’s and digital-payments company Paytm.
To bring down costs, the startup ended operations in several markets and dismissed or furloughed thousands of employees. It still works with more than 100,000 small hotel and home entrepreneurs that own and operate lodgings with Oyo’s technology designed to drive room yields higher.
To improve efficiencies, Oyo streamlined global operations into three groups — India & Southeast Asia, Europe and Oyo International.
