Byju's Moves US Court Challenging Acceleration Of $1.2 Billion Term Loan B, Seeks Redwood's Disqualification

Byju's has alleged that TLB lenders issued a notice demanding immediate payment of the entire amount under the TLB, despite knowing that the purported acceleration was under challenge before the court

Byju's said that with legal proceedings now on foot, in both Delaware and New York, the entire TLB stands disputed.

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Indian edtech start-up Byju's on Tuesday filed a complaint in the Supreme Court of New York to challenge acceleration of the $1.2 billion Term Loan B (TLB), the company said. The edtech major is also seeking the disqualification of Redwood, who contrary to the terms of TLB, purchased a significant portion of the loan while primarily trading in distressed debt. In a statment, the firm said, "Byju's has had to take these measures following a series of predatory tactics by the lenders, led by Redwood."

The company has alleged that TLB lenders issued a notice demanding immediate payment of the entire amount under the TLB, despite knowing that the purported acceleration was under challenge before the court.

Lender GLAS Trust Company and investor Timothy R Pohl filed a lawsuit against Byju's US-based entities for certain alleged wrongful acts. They have sued Byju's Alpha and Tangible Play for moving $500 million out of Byju's Alpha. The two entities are part of Think and Learn Private, the parent of Byju's.

Last month, Byju's said it has not defaulted on repayment of loans raised from American lenders and $500 million worth of loans were transferred from the group's US entities to fund growth plans.

Byju's said that with legal proceedings now on foot, in both Delaware and New York, the entire TLB stands disputed. It said that it remains open to discussions with the TLB lenders and is ready to continue making payments under the TLB if the lenders withdraw their "ill-conceived actions and honour the terms of the agreement".

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. As conveyed to the TLB lenders, BYJU'S remains financially robust with significant cash reserves," the company said.

Last month the start-up raised $250 million debt funding from US based investment manager Davidson Kempner Capital Management and is in discussion to secure an additional $700 million fund with other investors.

On March 3, the TLB lenders unlawfully accelerated the TLB on account of certain alleged non-monetary and technical defaults and undertook unwarranted enforcement measures, including seizing control of Byju's Alpha and appointing its own management, the company said. The firm also pointed out that the TLB lenders made an unsuccessful attempt in the Delaware proceedings to deprive Byju's of its contractual right to 'disqualify' lenders engaged primarily in opportunistic trades.

The Delaware court rejected this attempt, ruling that the TLB lenders “have not demonstrated either irreparable harm or the balance of the harms as required to support a provision restraining” this contractual right of Byju's, the company said, while alleging that the TLB lenders' agent has even refused to provide identities of the TLB lenders to Byju's which it is entitled to under the TLB, and the lenders have consistently taken measures to smear Byju's reputation. 

Meanwhile, Byju's will also launch the initial public offering (IPO) of its test preparatory arm Aakash Education Services Limited by middle of next year, the company said on Monday. Aakash Education Services Limited revenue is on track to reach Rs 4,000 crore with an EBITDA (operational profit) of Rs 900 crore in the fiscal year 2023-24, the company said.

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