BENGALURU: Troubles mount for edtech firm Byju’s as foreign lenders, who collectively provided over 85% of its $1.2 billion Term Loan B (TLB), have filed an insolvency plea against the firm.
People aware of the development said the petition was filed earlier this week with the National Company Law Tribunal (NCLT).
Byju’s said any proceedings by lenders before NCLT are premature and baseless. Byju’s spokesperson said, “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 NCLT are premature and baseless.”
Surprisingly, the acceleration and consequent actions by the lenders appear to be based, in part, on the failure of Whitehat Education Technology Pvt. Ltd, a wholly owned subsidiary of Think & Learn, to guarantee the term loan. 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, the firm said.
Previously too, the lenders have made unsuccessful attempts to interfere with Byju’s 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, the spokesperson explained.
The edtech firm and lenders last year decided to postpone the disagreement in US courts. In June last year, the company had filed a complaint in the New York Supreme Court to challenge the acceleration of the $1.2 billion TLB (the firm secured this loan in November 2021). It had skipped paying $40 million interest. Byju’s has been trying to repay the loan by selling Great Learning and Epic, which were acquired in 2021. But, so far, the company did not get any buyers.
“Incidentally, the Delaware court has also refused to interfere with Byju’s rights to disqualify distressed asset fund lenders under the loan agreement - who continue to take these steps in an attempt to get Byju’s to succumb to their extortionate demands. 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 US subsidiaries to settle matters,” the spokesperson added.
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. The firm recently posted Rs 8,245 crore net loss in FY22.
Timing of proceedings coincides with Byju’s rights issue
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. The edtech company recently posted `8,245 crore net loss in the financial year 2021-22.