Geelingo co-founder and CEO Ankiti Bose, who was recently fired from her position at the B2B e-commerce start-up, is seeking to repay the company’s entire outstanding debt of $ 40 million. This will give him an alternative to gaining more equity in the firm, said two people aware of the negotiations.
However, according to an investor in an Asia-based venture debt firm, Bose’s efforts to acquire more shares in the company could be met with pushback from the board and eventually lead to a legal battle if a warrant is sold to him. .
Sources told FE that Bose has already reached out to Verde Partners and Indies Capital with a term sheet to repay the entire pending loan. Verde and the Indies together provided a $ 40 million loan to Jillingo, led by Ankit in July 2021, valid until July 2023, the source added.
If the term sheet passes, Bose will now have access to convertible notes owned by two lenders, which could further increase its shareholding in the firm.
“The company was supposed to repay the loan in a 90-day cycle, but, following Bose’s suspension in April, the company missed payments the same month,” said Bose, a source familiar with the negotiations. Said the provider.
A second person added that both Verde and Indies have loan warrants that are transferable to any buyer under the preconditions signed between Gillingo and the lenders. In the case of an enterprise loan, a warrant is a security that gives the holder the right to purchase the company’s equity stock at a specified price within a specified period of time. But these warrants are only effective when the investors see the extra profit and are not necessarily used to recover the loan amount.
On May 13, Jillingo’s creditors reportedly decided to repay their entire loan, prompting the start-up to hire a financial adviser to evaluate the default tackle options. In a statement the same day, Jillingor’s board said that “due to Jillingor’s failure to meet its previous obligations under the loan agreement, the company’s creditors have decided to expedite full repayment of the loan.”
“The investigation into the allegations against Jilingo CEO Ankiti Bose is nearing completion,” the Jilingo board said in a May 13 statement.
“Ankiti will have technical access to these warrants, which are owned by both the venture lenders, and he will have the legal right to use them. Lenders are aware that even after 45 days of suspension of the drawing, no replacement has been found without any result of the investigation. Therefore, they have decided to withdraw the entire loan amount, “a source quoted earlier said.
Zilingo and the Indies Capital Press did not respond to an email asking for comment. Verde’s partners declined to comment on the story.
Sources added that Bose has already met with some Singapore and India-based institutional investors and hedge funds to raise the $ 40 million needed to repurchase the warrants and pay the rest of the principal to Verde partners and Indies Capital in full.
Currently, Bose owns about 8.3% of Jillingo.
“Technically in the United States and in India, entrepreneurial lenders get first priority when there is a liquidity crisis or when there is an unexpected shutdown. There are cases where lenders use the company’s miserable situation to acquire the company, but this is only possible if it is proved in court or there is no money left to legally repay the loan to the company, ”the investor said.
In the context of enterprise loans, a loan recall event, as seen in the case of Jillingo, only occurs as a last straw, when lenders make sure that the company is not in a position to repay the creditor or that there is no money left in the bank.
“A withdrawal means that the company has the right to withdraw the entire amount of debt, eliminating the quarterly payment structure. According to the standard agreement, if the lender exercises the right to withdraw, the company will have to pay the entire arrears within 30-60 days and will be used only as the last straw to recover their money, ”the investor added.
Bose, 30, who has led the company since its inception in 2015, has been facing financial irregularities and the board has accused him of increasing revenue. In a statement issued in early April, Bose called the board’s suspension and the charges against it “magical victims” and rejected all of the board’s claims.
The B2B start-up, which offers a technical platform for wholesale supply to fashion retailers, is one of the most famous start-ups derived from SEA Geography. However, as the CEO of the start-up is currently on hold, the board has launched a full audit of the accounting books, according to an earlier report.
Geelingo is one of Sequoia Capital India’s major investments in the Southeast Asia region, and the start-up entered the Unicorn Club when it raised $ 226-million Series D rounds in April 2019.
Complaints against Bose surfaced after the start-up started an internal process to raise $ 200 million in funds led by Goldman Sachs Group, which has now closed. Last month, a source aware of the funding negotiations told FE that the start-up had submitted all the original financial statements for a proper work process. The company currently has enough cash in the bank for the next 15-18 months, the FE reported last month.