Creditors to Byju’s have pulled out of negotiations with the company to recast a $1.2 billion loan, Bloomberg reported on Thursday, posing a fresh setback for the edtech giant as it struggles with steep losses and meeting its cost-reduction targets.

The talks were called off after the creditors moved court, accusing Byju’s of hiding $500 million of funds raised, the report said, citing people familiar with the matter. The lenders can now sell the term loan B securities of the firm as the restraint that came as part of the negotiations is lifted, they said.

Byju’s raised the $1.2 billion via a term loan B arrangement from the overseas market in November 2021. It was the largest TLB from Asia and one of the largest unrated TLBs globally. Edtech was still riding the late tailwinds of the pandemic, interest rates were cheap and the funding winter was still a couple of months away. The company was on a buying spree in the international markets and the loan was supposed to fund inorganic growth. But then the markets took a turn for the worse.

The lenders—who are seeking immediate partial repayment—bought the debt from primary holders in September when the loan slipped to a record 64.5 cents a dollar. The loan is now quoted at around 79 cents, according to Bloomberg.

Byju’s has to make an interest payment on the loan by 5 June, the people in the Bloomberg report said. The company will get “a large capital infusion” soon that will allow it to pay down the loan, its lawyer said in a US court last month while denying allegations of hiding the funds raised as loan.

Last month, Byju’s was reported to have raised $250 million in fresh funding from New York-headquartered investment firm Davidson Kempner Capital, and was close to securing an additional $700 million from a sovereign fund. The money from Davidson Kempner was raised against the cash flows of the edtech firm’s test prep subsidiary Aakash Educational Services, according to an Economic Times report.

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