BYJU’s on Tuesday said it has filed a complaint in the New York Supreme Court to challenge the accelerated $1.2 billion Term B Loan (TLB) and disqualify Redwood, alleging that it purchased a significant portion of the loan in violation of TLB terms, primarily engaging in distressed debt trading.
The edtech giant said it has had to take the measures following a series of “predatory tactics by the lenders, led by Redwood”.
BYJU’s said the entire TLB is disputed and the company 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.
“On 3 March 2023, the TLB lenders unlawfully accelerated the TLB on account of certain alleged non-monetary and technical defaults. On the back of this unconscionable acceleration of the TLB, the TLB lenders undertook unwarranted enforcement measures including seizing control of BYJU’S Alpha and appointing its own management. Not resting content with this, the TLB lenders (acting through their agent, GLAS Trust Company) commenced litigation in Delaware in an attempt to lend credence to these actions.,”
“The TLB lenders issued a notice demanding immediate payment of the entire amount under the TLB, despite knowing that this purported acceleration was under challenge before the court, BYJU alleged, adding that the TLB lenders’ agent has even refused to provide identities of the TLB lenders to BYJU’S – something BYJU’S is entitled to under the TLB. Additionally, the TLB lenders have consistently taken measures to smear BYJU’S reputation,” BYJU’s said.
The company alleged that “Redwood – a lender known to primarily trade in distressed debt – consistently increased its exposure by acquiring a sizeable stake in the TLB with the intent of making windfall gains.”
Once Redwood’s disqualification takes effect, it would be restrained from exercising critical rights under the TLB, BYJU added.
Last week BYJU’s lenders had pulled out of negotiations to restructure a $1.2-billion loan, a source familiar with the matter told DealStreetAsia.
The negotiations were called off after creditors moved to court accusing the firm of hiding $500 million.
The company has denied the allegation. “This is entirely incorrect… this is an interim order of a Delaware Court to maintain status quo in relation to BYJU’S Alpha, a non-operative US entity set up to receive the Term Loan B, with no employees,” said the spokesperson at BYJU’s.
BYJU’s had been in talks with lenders to make tweaks in covenants of the term loan B with creditors, including lower coupons and more time to repay.
When asked about the status of payment of the loan, BYJU’s co-founder Byju Raveendran told DealStreetAsia in a webinar in April, “The maturity date is November 2026. We are well-capitalized. We will evaluate options and explore options of potentially refinancing the loan with equity rounds.”
“It is true that the current macro environment has led to high-interest rates, which has made debt costlier for everyone. BYJU’s has enough and more cash reserves to meet all obligations,” co-founder Divya Gokulnath said during the same webinar.
