A group of lenders have termed the case filed by BYJU’S in the New York Supreme Court as “meritless” and said it’s a move to avoid complying with regulations.
The group of ad hoc term loan lenders, collectively own more than 85 per cent of BYJU’S $1.2 billion term loan.
“BYJU’S’ meritless lawsuit against its term loan lenders is simply an effort to avoid complying with its obligations, including making contractually required payments. The lender group, comprised of 21 highly respected global institutional investors, has sought to work constructively with the company over the past nine months to cure its numerous defaults and will continue to do so in good faith,” the statement read.
However, in the event BYJU’S intentionally remains in default, the lender group reserves all rights available to it to enforce the credit agreement, it added.
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The edtech major had sued lenders led by Redwood in the New York Supreme Court to challenge the acceleration of the $1.2 billion Term Loan B (TLB). It was due to make a quarterly interest payment of about $40 million to meet the June 5 deadline on the said $1.2 billion loan.
This loan is at the center of the company’s financial troubles, and failure to pay on that date means the company may default on the loan, Bloomberg reported.
BYJU’s had asked for the disqualification of Redwood, who it accused of purchasing a significant portion of the loan while primarily trading in distressed debt, contrary to the terms of TLB. “BYJU’S has had to take these measures following a series of predatory tactics by the lenders, led by Redwood,” it said in a release.
India’s most valued start-up was even reported to have been in talks with creditors to restructure the $1.2 billion loan, but creditors had withdrawn from the talks. The sum of the loan is reported to be the largest unrated loan to a start-up ever.
The edtech player faces more issues than one. It even faced a raid by the Enforcement Directorate (ED) for alleged FEMA violations in April this year.
The ED seizure report noted that “various incriminating documents and digital data were seized” and had said other FEMA violations were found. The charge was contested by the company, and investigations in the case are ongoing.