Byju’s Creditors Petition To Put More Units In US Bankruptcy
A group of creditors petitioned to place multiple units tied to Indian education technology company Byju’s into bankruptcy, saying the companies aren’t paying their debts as they come due.
(Bloomberg) -- A group of lenders asked a court to impose bankruptcy oversight on multiple units tied to the struggling Indian education technology company Byju’s, claiming millions of dollars are being “siphoned” out of the companies.
Creditors led by HPS Investment Partners filed involuntary Chapter 11 cases in Delaware against Neuron Fuel Inc., Epic! Creations Inc. and Tangible Play Inc. on Wednesday. All three were once affiliated with Byju’s Alpha, a unit of the once high-flying startup that was put into bankruptcy earlier this year after defaulting on $1.2 billion of debt.
The lenders accused firm’s eponymous founder Byju Raveendran of violating their debt contracts by refusing to give them financial details about the three units, which are known “alleged debtors” now that they face bankruptcy. The units should have their spending restricted immediately and eventually a trustee may need to be appointed to run them, the lenders said in court papers.
“So the petitioning creditors undertook their own investigation, and what they learned is frightening: the alleged debtors are in financial distress and money is being siphoned out of them,” the lenders said in court papers.
Involuntary bankruptcy cases, which are brought by debt holders, require a company to either agree to put itself under court protection or fight creditors to have the petition thrown out. Firms including Redwood Capital Management, Veritas Capital and loan agent Glas Trust also signed onto the case, court papers show.
Byju’s plans to challenge the case, which in an emailed statement it called “premature to say the least.” The company argues that some of the lenders are not legitimate owners of the debt because they are on a list of “disqualified” investors who, under the debt contracts, are barred from holding the loan.
“The lenders claim to be creditors of these entities, notwithstanding that the question of whether the underlying loan amount is due and payable remains to be decided,” a company spokesperson said in an email, referring to a lawsuit challenging whether the $1.2 billion loan is in default.
The units were affiliates of Byju’s Alpha until March 2023, when Glas Trust took control of the Alpha unit, according to court papers.
Byju’s, once one of India’s hottest tech startups, has been in a prolonged fight with creditors over a debt restructuring. Raveendran built an aggressively expanding education company that was once valued at $22 billion but struggled when demand for tutoring dropped off as the pandemic waned and schools reopened.
The company and its lenders are now battling in courts in Delaware and New York, primarily over where the troubled company stashed $533 million that jilted lenders say should go to them.
The case is Epic! Creations, Inc., 24-11161, US Bankruptcy Court, District of Delaware (Wilmington).
(Updates with response from Byju’s in the sixth and seventh paragraph.)
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