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A group of lenders to educational technology (edtech) giant Byju’s has told the firm that they’re open to negotiations with the company to resolve litigation and other disputes, according to people familiar with the matter. However, they have told Byju’s that they will not engage in the firm’s proposal for one-on-one meetings, according to sources.
Byju’s recently filed a suit against US-based investment management firm Redwood to challenge the acceleration of the $1.2-billion Term Loan B (TLB) facility, and disqualify the lender for its “predatory tactics”. Byju’s also skipped an interest payment of about $40 million on the loan.
The lenders want Byju’s to send a draft amendment proposal to the group, according to people familiar with the matter. This happened after the firm cancelled a meeting that had been scheduled for Monday with creditors.
According to sources, Byju’s wants to do one-on-one meetings with lenders instead of having a group talk to influence them individually and split the group of ad hoc lenders. However, the lenders want to have a collective discussion to comply with an agreement that mandates collaborative efforts during negotiations.
Byju’s declined to comment about the negotiations with lenders.
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However, according to a source close to the company, Byju’s has already started having one-on-one interactions with lenders and had discussions with a couple of them, according to a source close to the company. It has plans to have more such calls with other lenders in the next few days.
The development about lenders telling Byju’s that they are open to negotiations but will not engage in the firm’s proposal for one-on-one meetings was first reported by Bloomberg.
Earlier Byju’s reached out to a group of lenders after it skipped an interest payment on its loan. According to Bloomberg, the company scheduled a call with lenders on Monday to discuss an amendment proposal. Details of the proposal were expected to be shared ahead of the call.
A group of ad hoc lenders, who collectively own more than 85 per cent of Byju’s term loans amounting to $1.2 billion, said the recent lawsuit filed by the edtech firm in the Supreme Court of the State of New York County lacks merit.
“Byju’s meritless lawsuit against its term loan lenders is simply an effort to avoid complying with its obligations, including making contractually required payments,” said lenders in a statement.
They said the lender group, comprising 21 global institutional investors, sought to work constructively with the company over the past nine months to cure its “numerous defaults” and would continue to do so in good faith.
In the New York Supreme Court, the edtech firm recently argued that contrary to the conditions of the loan facility, Redwood purchased a significant portion of the loan while primarily trading in distressed debt.
Given that legal proceedings are now on in both Delaware and New York, the entire TLB is disputed, the company said in a statement. TLB is a term loan by institutional investors with the prime goal of maximising their long-term returns.
The Bengaluru-headquartered company’s US entity Byju’s Alpha was recently sued in Delaware by an agent of lenders to whom the company owes $1.2 billion. The lawsuit was filed by GLAS Trust Company and investor Timothy R Pohl against Byju’s Alpha, Tangible Play (Osmo), and Riju Raveendran. The two companies being sued are units of Think and Learn Private, an edtech firm founded by Byju Raveendran.
The lenders have reportedly accused the company’s entity, which has no employees, of hiding $500 million as part of a battle between the creditors and the edtech firm. The allegation was made during a court hearing last month in Delaware, where Alpha faces a lawsuit over who should control the firm. The lenders claim that because of a default earlier this year, they have the right to put their representative, Timothy R Pohl, in charge.
Byju’s Alpha borrowed $1.2 billion, and the lenders received significant pledges of collateral to protect their loans.
“As a result of repeated and ongoing breaches of the credit agreement, GLAS, as collateral agent under loan documents and at the direction of the required lenders, has exercised remedies, which resulted in 100 per cent of Byju’s Alpha’s equity being transferred ‘to its name’,” alleged the lenders in the petition filed in the Court of Chancery of the State of Delaware and reviewed by Business Standard. The document is dated May 23, 2023.
