Ankiti Bose offers to pay off Zilingo’s $40 million debt

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Zilingo co-founder and CEO Ankiti Bose, who was recently suspended from her job at the B2B e-commerce startup, plans to repay the company’s entire outstanding debt worth of $40 million. This would give him the opportunity to gain more equity in the business, said two people with knowledge of the talks.

However, according to an investor in an Asia-based venture capital firm, Bose’s effort to acquire more shares in the company could be met with a refusal from the board of directors and possibly lead to a legal battle if the warrants were to be sold to him. .

Sources told FE that Bose had already contacted Varde Partners and Indies Capital with a term sheet to repay the full amount of the pending loan. Varde and Indies jointly extended a $40 million loan to Zilingo under Ankiti management in July 2021, which runs until July 2023, the sources added.

If the term sheet is accepted, Bose will have access to the convertible notes currently held by the two debt providers, which could further strengthen its stake in the business.

“The company was supposed to make refunds on a 90-day cycle, however, after Bose was suspended in April, the company missed the refund that was due the same month,” one of the people familiar with the talks between Bose and debt providers said.

A second person added that Varde and Indies hold warrants on the loan, which are transferable to any purchaser under previous terms signed between Zilingo and the creditors. In the context of venture debt, a warrant is a security that gives its holder the right to buy shares of the company at a specified price within a specified time. But these warrants are only executed when investors see an additional gain and are not necessarily used to recoup the debt amount.

As is well known, on May 13, Zilingo’s creditors decided to recall their entire loan, prompting the start-up to appoint a financial adviser to assess options for dealing with the default. In a statement the same day, Zilingo’s board of directors said that “due to Zilingo’s failure to meet its prior obligations under the loan agreement, the company’s lenders have made the decision to ‘accelerate the repayment of the entire loan’.

“The investigation into the allegations against Ankiti Bose, the CEO of Zilingo, is nearing completion,” Zilingo’s board said in a May 13 statement.

“Ankiti will essentially gain technical access to these warrants held by the two venture capital firms, and it may also obtain the legal right to exercise it. Debt providers are wary that a replacement for Ankiti has not been found even 45 days after his suspension with no results in the investigation so far, therefore they have decided to recall the full amount of the loan,” said one of the previously cited sources.

Zilingo and Indies Capital did not respond to emails seeking comment until time to go to the press. Varde Partners declined to comment for the story.

Sources also said Bose had already met with a few Singapore- and India-based institutional investors and hedge funds to raise the $40 million needed to redeem the warrants and pay the remainder of the principal in full to Varde Partners and Indies Capital.

Currently, Bose owns approximately 8.3% of Zilingo.

“Technically, in the US and India, subprime debt providers have priority in the event of liquidity events or in the event of an unscheduled shutdown. There have been instances where debt providers have used distressed business scenarios to take over the business, but anything is only possible if it is proven in court or legally that the business has not more money to repay loans taken out,” the investor said.

A loan recall event in the context of subprime debt, as in the case of Zilingo, only occurs at the last drop, when lenders are convinced that the company is unable to repay the creditor or has no more money in the bank, says the investor.

“A reminder means that the business has the right to recall the full amount of the loan, turning off the quarterly payment structure. In accordance with standard agreements, if the lender exercises its right of withdrawal, the business must pay the full amount unpaid within 30 to 60 days and is only used as the straw to get his money back,” the investor added.

Bose, 30, who has led the company since its inception in 2015, faces allegations of financial irregularities, with the board accusing him of inflating his income. In a statement in early April, Bose called the board suspension and allegations against it a “witch hunt” and refuted all of the board’s claims.

The B2B start-up, which offers a technology platform for fashion retailers to source wholesale, was one of the most famous start-ups to emerge from the SEA geography. However, the start-up’s CEO is currently suspended, with the board launching a full audit of the books, according to earlier reports.

Zilingo is one of Sequoia Capital India’s key investments in the Southeast Asia region, and the startup entered the unicorn club when it raised a Series D funding round of 226 million in April 2019.

The allegations against Bose emerged after the start-up began the $200 million internal fundraising process led by Goldman Sachs Group, which has now been halted. Last month, a source with knowledge of those funding talks told FE that the startup had submitted all key financials for a due diligence process. The company currently has enough cash in the bank for the next 15 to 18 months, FE reported last month.

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