 "Byju's")
US-based lenders to Byju’s have approached the National Company Law Tribunal (NCLT) Bench in Bengaluru to start corporate insolvency proceedings against the edtech company.
The ad hoc group of lenders (the Ad Hoc Group), which lent $1.2 billion as term loans (Term Loans) to Byju’s, said GLAS Trust Company LLC (as administrative agent and collateral agent of the Term Loans) had filed a petition against Think & Learn (doing business as Byju’s) before the Bench.
The lenders said this was done after over 16 months of efforts on behalf of the Ad Hoc Group to restructure the loans. If these efforts were successful, it would have solved the loans’ outstanding defaults and acceleration, and ended litigation while avoiding further enforcement action, they added.
“The myriad issues facing Byju’s are entirely self-inflicted. For months, we sought to avoid this exact situation, repeatedly attempting to engage constructively with (the) Byju’s management and other stakeholders and providing them with multiple paths to reach a mutually agreeable resolution, even including after the Delaware court confirmed the validity of Byju’s’ defaults,” said the Ad Hoc Group.
“It is our belief now that (the) Byju’s management has no intention or ability of (honouring) its obligations … That said, we are hopeful that India’s corporate insolvency resolution process will help stabilize Think & Learn and result in implementing a resolution plan that accounts for the interests of all stakeholders.”
TLB (Term Loan B) is a term loan by institutional investors with the prime goal of maximising their long-term returns.
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In November last year, the lenders said the Delaware Chancery Court recognised Byju’s had defaulted on its loan obligation. It also found the Term Loan lenders were within their contractual rights to replace the sole director of Byju’s Alpha (the US subsidiary of Byju’s established in 2021 to receive proceeds of the term loans).
They alleged Byju’s had exacerbated its defaults and repeatedly disregarded its loan obligations after default.
This includes refusing to make any contractually required loan payments. They also alleged Byju’s Alpha transferred $533 million in loan proceeds to an obscure, nascent hedge fund and then apparently shifted the ownership of the money to a still undisclosed entity.
The lenders said the former director at Byju’s Alpha (who was appointed by Byju’s) and the management of Byju’s had refused to provide specific information on the status of such funds.
They alleged Byju’s was seeking to retain a substantial portion of the proceeds from the contemplated sale of its asset Epic, the US-based digital reading platform. This is despite the lenders’ senior having secured claims on Epic’s assets and the clear requirements of the credit agreement.
However, Byju’s said the validity of lenders’ action, including acceleration of the term loan, was pending and under challenge in several proceedings, including before the New York Supreme Court. Hence, any proceedings by lenders before the NCLT are premature and baseless, it said.
Byju’s said the acceleration and consequent action by the lenders appeared to be based, in part, on the failure of Whitehat Education Technology Pvt. Ltd, a wholly owned subsidiary of Think & Learn, to guarantee the term loans. This is despite the fact that the provision of such a guarantee would contravene central-bank regulations.
“In good faith and on a continuous basis, Byju’s has been in regular touch with the lenders and has also involved them in the sales process of some of its prized US subsidiaries to settle matters,” said the company.
