’Meritless’: Byju’s lenders respond to lawsuit

A group of ad hoc term loan lenders, who collectively own more than 85% of BYJU’s $1.2 billion term loan, has issued a statement in response to a recent lawsuit filed by the ed-tech unicorn in the Supreme Court of the State of New York County of New York.

“BYJU’S’ meritless lawsuit against its term loan lenders is simply an effort to avoid complying with its obligations, including making contractually required payments. The lender group, comprised of 21 highly respected global institutional investors, has sought to work constructively with the company over the past nine months to cure its numerous defaults and will continue to do so in good faith. However, in the event, BYJU’s intentionally remains in default, the lender group reserves all rights available to it to enforce the credit agreement," the lenders said.

Edtech unicorn Byju's skipped paying $40 million interest on a $1.2 billion loan that was due on 5 June 2023. One of the valuable startups in the country disqualified the US lender for "predatory" tactics.

In a statement, the startup said it has elected not to make further payments on the $1.2 billion so-called term loan B (TLB).

The ed-tech platform filed a suit against investment management firm Redwood saying the US entity purchased a significant portion of the loan while primarily trading in distressed debt.

The lenders in March unlawfully accelerated the loan due to certain alleged non-monetary and technical defaults, Byju's said adding that the lenders undertook unwarranted enforcement measures, including seizing control of its US unit -- Byju's Alpha, and appointing its management.

Byju's, which had been trying to strike a deal with creditors to restructure the loan, said it has chosen not to make further payments, including interest until the dispute is decided by the court.

After the Covid-pandemic, the online tutoring boom tapered and Byju's finances shrunk.

The company has alleged that TLB lenders issued a notice demanding immediate payment of the entire amount under the TLB, despite knowing that the purported acceleration was under challenge before the court.

Lender GLAS Trust Company and investor Timothy R Pohl filed a lawsuit against BYJU's US-based entities for certain alleged wrongful acts.

They have sued BYJU'S Alpha and Tangible Play for moving USD 500 million out of BYJU'S Alpha.

The two entities are part of Think and Learn Private, the parent of BYJU.

Last month, Byju's said it has not defaulted on repayment of loans raised from American lenders. Byju's claimed that 500 million worth of loans were transferred from the group's US entities to fund growth plans.

BYJU's said that it remains open to discussions with the TLB lenders and is ready to continue making payments under the TLB if the lenders withdraw their "ill-conceived actions and honour the terms of the agreement".

Last month, the company raised $250 million in debt funding from US-based investment manager Davidson Kempner Capital Management and is in discussion to secure an additional $700 million fund with other investors.