Edtech major Byju’s troubled saga with its lenders continues, as the company has sued lenders led by Redwood in the New York Supreme Court to challenge the acceleration of the $1.2 billion Term Loan B (TLB).
This comes as the company 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 has asked for the disqualification of Redwood, who it accuses 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
As the fiasco unfolds, industry peers have put their views. Ronnie Screwvala, Chairperson and Co-Founder of upGrad tweeted, “Drama with Zero content….not even a Netflix or HBO will buy it. While sullying India’s name as a great investment destination! Wonder what its erstwhile Board thinks of their fiduciary duties…” He however clarified that the tweet was his personal view and not that of his company.
A detailed questionnaire sent by businessline to Byju’s on the company’s next course of action did not elicit a response. The company further claimed that on March 3, 2023, TLB lenders unlawfully accelerated the TLB on account of certain alleged non-monetary and technical defaults. On the back of this acceleration of the TLB, the lenders undertook unwarranted enforcement measures, including seizing control of BYJU’s US subsidiary Alpha and appointing its own management.
In the Delaware proceedings, the TLB lenders unsuccessfully attempted to deprive BYJU’s of its contractual right to ‘disqualify’ lenders engaged primarily in opportunistic trades. The Delaware Court rejected this attempt. Despite this, the TLB lenders continued to conduct themselves in a “high-handed manner” and issued a notice demanding immediate payment of the entire amount under the TLB, it added. BYJU’s further said, “Redwood consistently increased its exposure by acquiring a sizeable stake in the TLB with the intent of making windfall gains.”
The company said that it will not be making any payments. “Given that legal proceedings are now on foot in both Delaware and New York, it is clear that the entire TLB is disputed. As such, BYJU’S cannot be expected to and has elected not to make any further payment to the TLB lenders, including any interest, until the dispute is decided by the Court,” it said.
However, it said it remains open to discussions with the TLB lenders and is ready, willing, and able to continue making payments under the TLB if the lenders withdraw their ill-conceived actions and honor the terms of the agreement.