BYJU’S Files Suit Against TLB Lenders, Halts Payments Of $1.2 Bn Loan

Indian edtech decacorn BYJU’S said on Tuesday (June 6) that it has filed a complaint against the acceleration of the $1.2 Bn Term Loan B (TLB) and to disqualify Redwood as a lender.

The edtech further said that even though Redwood primarily trades in distressed debt, it purchased a significant portion of the TLB and has been spearheading a series of ‘predatory tactics’ against it.

BYJU’S added that Redwood has continued to increase its exposure by acquiring a big stake in Term Loan B “with the intent to make windfall gains”.

“In the wake of all these actions, BYJU’S was left with no option but to commence proceedings in New York – the contractually agreed forum – challenging the acceleration,” said the edtech giant.

The edtech has also issued a notice to Redwood and its entities, disqualifying them. Per BYJU’S, once the disqualification takes place, the lender would be restrained from exercising critical rights under the TLB. The edtech also said it has demonstrated ‘remarkable restraint’, calling the lenders ‘hawkish trader-lenders’.

The edtech giant also called the lenders’ conduct ‘high-handed’, as the TLB lenders are said to have demanded immediate payment of the entire amount.

BYJU’S To Stop Making TLB Payments

The edtech decacorn said that the entire TLB was now under dispute, given two legal proceedings are going on.

“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,” said the edtech, clarifying its intent.

To be sure, BYJU’S claims to be ‘financially robust’ with ‘significant cash reserves’, and said that even though the loan is under dispute, it remains open to discussions with the lenders and “is ready, willing and able to continue making payments under the TLB if the lenders withdraw their ill-conceived actions and honour the terms of the agreement.”

The edtech’s confidence comes from the fact that the lenders had alleged during the Delaware proceedings that it was hiding $500 Mn from them, which BYJU’S promptly denied. The edtech giant has also recently raised a further $250 Mn in debt from Davidson Kempner.

The Acceleration – Timeline Of Events

BYJU’S also established a clear timeline of events, stating that the TLB was accelerated on March 3 on account of “certain alleged non-monetary and technical defaults”.

Around this time, it was widely reported in the media that the edtech giant has agreed to pay higher interest rates on the TLB, though  BYJU’S never confirmed the development.

Calling the acceleration of the TLB ‘unconscionable’, BYJU’S further stated that the lenders seized control of BYJU’S Alpha and appointed their 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 $22 Bn-valued edtech said.

BYJU’S added that the Delaware proceedings saw the TLB lenders unsuccessfully attempt to deprive BYJU’S right to ‘disqualify’ lenders.

The edtech said that the Delaware court rejected the said 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 move from the edtech decacorn comes after its lenders called off negotiations to restructure the TLB. The negotiations are said to have gone sour after the lenders asked BYJU’S to pay a part of the loan upfront, which the edtech did not.