Byju's Taken To NCLT By U.S. Lenders

Byju's has been taken to the National Company Law Tribunal by its lenders, as troubles mount for the beleaguered edtech that is testing its unicorn status.

The lenders, which own a majority of the $1.2-billion Term Loan B, have filed an insolvency petition. In response, a Byju's spokesperson has said the lenders' actions are "premature and baseless".

In a statement, the lenders said this action was taken following "over 16 months of good faith efforts on behalf of the ad hoc group to restructure the term loans, which, if successful, would have immediately solved for the loan’s numerous outstanding defaults, acceleration, and ended all open litigation while avoiding further enforcement actions."

"The timing of these proceedings is also conspicuous as it coincides with the commencement of a rights issue by the parent company of Byju's," a company spokesperson said.

Byju's parent Think & Learn Pvt. and the lenders — Glas Trust Company, which owns 85% of the loan — have been mired in a legal battle for more than a year, after the edtech made technical defaults on repayments. Since then, the two have been litigating in a U.S. court as multiple rounds of negotiations to rework terms have failed.

Last June, Byju's decided to miss a $40-million interest payment on its term loan. In August, it missed another deadline for repayment, exacerbating the matter.

"As we have stated before, the validity of lenders' actions, including acceleration of the term loan, is 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," the spokesperson said.

The acceleration and consequent actions by the lenders appear to be based, in part, on the failure of Whitehat Education Technology Pvt., a wholly owned subsidiary of Think & Learn, to guarantee the term loan, according to the spokesperson.

"This is despite the fact that provision of such guarantee would contravene extant RBI regulations. In fact, proceedings are on foot before the Delaware appellate courts on this very issue," Byju's said.

It accused the lenders of having previously made "unsuccessful attempts" to interfere with its rights to deal with capital provided under the loan agreement. "The Delaware Chancery Court has rightfully refused to let the lenders do so, and lenders' subsequent attempts on this front have been unsuccessful."

"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 U.S. subsidiaries to settle matters," the spokesperson said.

Byju's said that the initiation of this legal process does not "reflect the true financial standing of our company, nor does it accurately represent our ability to meet our obligations".

"We firmly maintain that we are a resilient, viable entity that is incrementally charting a path towards sustainable growth."

The lenders maintained that Byju's exacerbated its defaults and repeatedly disregarded its loan obligations post-default, including: ­­

• Refusing to make any contractually required loan payments.

• Byju's Alpha transferring $533 million in loan proceeds to an obscure, nascent hedge fund.

• Seeking to retain a substantial portion of the proceeds from the contemplated sale of Epic!, despite the lenders’ senior secured claims on Epic!’s assets and the clear requirements of the credit agreement.

• Significantly delaying its financial reporting obligations, not approving the FY22 audit which was due in September 2022, until December 2023, and only made public filing of such financial statements after the lenders filed for insolvency.

"The myriad issues facing Byju's are entirely self-inflicted... It is our belief now that Byju's management has no intention or ability of honoring its obligations under the term loans. 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," the ad hoc group said.

Additionally, French business process outsourcing major Teleperformance has also taken Byju's to NCLT. The case was filed on Nov. 4, 2023 and registered on Jan. 25. The next listing date hasn't yet been mentioned, as per the NCLT website.

This will be the third petition against the Bengaluru-based startup in the NCLT, after the BCCI and the overseas lenders' filings.