OYO: Eye for Revival, Oyo Secures $660 Million Debt

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oh yo Hotels & Homes is closed a debt financing round of $660 million from global institutional investors to pay off existing loans, according to people aware of the company’s goal to recover from the disruption caused by the second wave of the pandemic.

Wall Street investors such as Fidelity, Citadel Capital Management and Varde partners have subscribed to Oyo’s term loan B (TLB), sources told ET.

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Oyo did not confirm the names of the participating investors, but said its TLB was “oversubscribed” nearly 1.7 times, with a total pledge of nearly $1 billion.

Thanks to strong interest from these institutional investors, Oyo increased the size of the offering by 10% to $660 million from an initial $600 million. This has resulted in the entire funding being raised at an interest rate of 825 basis points, compared to the initial price guidance of 850 basis points, the company said.

Under the terms of the deal, Oyo must repay the principal of the loan after six years with regular interest payments.

According to Abhishek Gupta, chief financial officer of the group, Oyo, the funds will be used to pay off the company’s past debts, strengthen its balance sheet and other business purposes, including investment in product technology.

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Emails sent to Fidelity did not elicit a response until Thursday.

“This will enable Oyo to broaden its shareholder base and gain significant third-party validation in terms of where the business quality is,” said one person who was aware of the plans. International rating agencies Moody’s and Fitch have rated Oyo as stable, company executives told ET.

Oyo had also insured debt as of now defunct British lender Greensil, which was backed by SoftBank, also an investor in Oyo. That loan is also currently being repaid, according to sources.



Covid-19 impact

The latest round comes at a time when the hospitality industry in India has not yet fully recovered from the impact of Covid-19, even as bookings are gradually increasing as lockdown restrictions are lifted. A possible third wave of the pandemic could disrupt the industry again, leaving market conditions uncertain.

debt

At a recent event, founder Ritesh Agarwal said Oyo still has about $800 million in cash in the bank and monthly spend is between $4 and 5 million for all businesses. Currently, 43% of the turnover comes from India and South East Asia, while 28% comes from Europe and the rest from other world markets.

The company had to
cutting back on operations in markets such as the US and China. Even in India, it had to significantly reduce its workforce to curb spending in light of the impact of the pandemic on gross bookings.

“We are seeing a healthy recovery, with vaccination coverage of over 40% (of the total population) in Europe. In India, we are three to four months away from a vaccination rate of over 40%. Once India is there, it means a much stronger recovery is on the way,” said Gupta, who sees the latest funding round as a testament to the strength and success of Oyo’s large-scale products and their high-value potential.

“Oyo is well capitalized and on track for profitability. Our two largest markets have shown profitability at the slightest sign of industry recovery from the pandemic,” said the chief financial officer.

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