A group of lenders to Byju’s, the prominent edtech giant, have informed the company that they are open to negotiations in order to resolve the ongoing litigation and other disputes, according to sources familiar with the matter. However, these sources also revealed that the lenders have declined Byju’s proposal for one-on-one meetings.
Recently, Byju’s filed a lawsuit against the US-based investment management firm, Redwood, challenging the acceleration of a $1.2-billion term loan B (TLB) facility and seeking to disqualify Redwood for engaging in what it considers “predatory tactics.” Byju’s also failed to make an interest payment of approximately $40 million on the loan.
Sources familiar with the matter have disclosed that the lenders are requesting Byju’s to send them a draft amendment proposal. This development followed the cancellation of a meeting that was scheduled for Monday with the company’s creditors. Bloomberg was the first to report on the lenders’ willingness to negotiate but refusal to engage in one-on-one meetings.
Earlier, Byju’s reached out to a group of lenders after defaulting on an interest payment for its loan. According to Bloomberg, the company had arranged a call with the lenders on Monday to discuss an amendment proposal, with details expected to be shared prior to the call.
The ad hoc lenders, who collectively hold over 85% of Byju’s term loans amounting to $1.2 billion, have stated that the recent lawsuit filed by the edtech firm in the Supreme Court of the State of New York County lacks merit. In a statement, the lenders declared, “Byju’s meritless lawsuit against its term loan lenders is simply an effort to avoid complying with its obligations, including making contractually required payments.” They further expressed their intent to work constructively with the company over the past nine months to address its “numerous defaults” and reiterated their commitment to doing so in good faith. The lender group consists of 21 global institutional investors.
Byju’s recently argued in the New York Supreme Court that Redwood’s purchase of a significant portion of the loan violated the loan facility’s terms, claiming that Redwood primarily engages in distressed debt trading. As a result, Byju’s contends that the entire TLB is now disputed. TLB refers to a term loan sought by institutional investors aiming to maximize their long-term returns.
In a separate legal development, Byju’s US entity, Byju’s Alpha, faced a lawsuit in Delaware from a lenders’ agent 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. Both Tangible Play and Riju Raveendran are units of Think and Learn Private, the edtech firm founded by Byju Raveendran.
The lenders have reportedly accused Byju’s Alpha, an entity with no employees, of concealing $500 million as part of an ongoing battle between the creditors and the edtech firm. This allegation emerged during a court hearing last month in Delaware, where Alpha is facing a lawsuit over the question of who should control the firm. The lenders argue that, due to a default earlier this year, they have the right to appoint their representative, Timothy R Pohl, to assume control.
According to the lenders’ petition filed in the Court of Chancery of the State of Delaware and reviewed by Business Standard, Byju’s Alpha borrowed $1.2 billion, and in response to repeated breaches of the credit agreement, the collateral agent, GLAS, acted in accordance with the loan documents and the direction of the required lenders. This resulted in the transfer of 100% of Byju’s Alpha’s equity under its name. The document, dated May 23, 2023, details these allegations.