Byju’s Battles TLB Lenders in Court, Takes on Redwood: Edtech giant Byju’s challenges the acceleration of a $1.2 billion loan, files a complaint and disqualifies Redwood. Amidst allegations, funding rounds, and delayed filings, the company remains resolute in its fight for fair treatment and seeks an amicable resolution.
Byju’s, a prominent edtech giant, has filed a complaint in the New York Supreme Court to challenge the acceleration of a $1.2 billion Term Loan B (TLB) and disqualify Redwood, a lender known for trading in distressed debt. The company alleges a series of predatory tactics by the lenders, led by Redwood.
According to Byju’s, on March 3, 2023, the TLB lenders unlawfully accelerated the loan based on alleged non-monetary and technical defaults. As a result, the lenders seized control of Byju’s Alpha and appointed their own management, in addition to initiating litigation in Delaware. However, the Delaware court rejected the lenders’ attempt to deprive Byju’s of its contractual right to disqualify lenders engaged primarily in opportunistic trades.
Despite this setback, the TLB lenders continued their high-handed behavior. They demanded immediate payment of the entire TLB amount, even though the acceleration was under challenge in court. Furthermore, the lenders’ agent refused to provide the TLB lenders’ identities to Byju’s, which the company is entitled to under the TLB. Additionally, the lenders consistently took measures to tarnish Byju’s reputation.
In response, Byju’s initiated proceedings in New York, the agreed-upon contractual forum, to challenge the acceleration. The company also issued a notice to disqualify Redwood, aiming to restrain them from exercising critical rights under the TLB. Byju’s had refrained from utilizing the disqualification clause and sought an amicable resolution with the lenders, despite their hawkish behavior.
Given the ongoing legal proceedings in Delaware and New York, Byju’s asserts that the entire TLB is disputed. Consequently, the company has chosen not to make any further payments, including interest, to the TLB lenders until the court resolves the dispute. Byju’s assures that it remains financially robust with significant cash reserves and remains open to discussions if the lenders withdraw their actions and honor the agreement.
Byju’s Alpha, the company’s US entity, was sued in Delaware by GLAS Trust Company and investor Timothy R Pohl, representing the lenders to whom Byju’s owes $1.2 billion. The lawsuit arose after months of negotiations between the creditors and Byju’s. Allegations were made that the entity, which has no employees, hid $500 million during a court hearing in Delaware, where the control of the firm is under dispute.
Byju’s has raised Rs 2,000 crore ($250 million) from Davidson Kempner Capital Management, a US-based investment firm, through a structured instruments deal. The funds were raised against convertible notes issued by Aakash, in which Davidson Kempner Capital Management will have a stake in its upcoming market debut. This investment is part of Byju’s ongoing $1-billion funding round at a valuation of $22 billion, with discussions underway with various investors, including Abu Dhabi’s sovereign wealth fund ADQ.
Apart from fundraising challenges, Byju’s is yet to file its 2021-22 results with the Ministry of Corporate Affairs (MCA). While other edtech unicorns have already filed their financials, Byju’s has been delaying the submission for over seven months. The company had also faced significant delays in filing its FY21 results, submitting them in September 2022 after an 18-month delay.
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