IRP Pankaj Srivastava took the step after concluding that Glas Trust did not represent the minimum 51% of lenders in the consortium, which provided the $1.2 Bn TLB
Meanwhile, Glas Trust has moved the Bengaluru bench of NCLT seeking to remove Srivastava as the IRP
This comes at a time when BYJU’S is grappling with insolvency proceedings, a funding crunch, multiple layoffs, mounting losses, a public spat with investors
The insolvency resolution professional (IRP) of BYJU’S
has reportedly ousted Glas Trust Co, a consortium of the troubled edtech startup’s US-based lenders, from the committee of creditors (CoC).
IRP Pankaj Srivastava took the step after concluding that Glas Trust did not represent the minimum 51% of lenders in the consortium, which provided the $1.2 Bn term loan B (TLB) to BYJU’S, Economic Times reported citing sources.
The development came to pass during the first meeting of the committee of creditors on Tuesday (August 3).
As per a separate Times of India report, Glas Trust recently moved the Bengaluru bench of the National Company Law Tribunal (NCLT) seeking Srivastava’s removal as the IRP.
In an application filed with the tribunal on August 30, the lenders called for Srivastava’s ouster saying that he failed to comply with current bankruptcy rules, which stipulate that the first meeting of the committee shall be held within seven days of the constitution of the CoC.
The matter will now reportedly be heard on Wednesday (September 4).
Meanwhile, sources told ET that BYJU’S has disqualified most of the lenders represented by Glas Trust, citing the edtech major’s right under the credit agreement to exclude “predatory lenders focussed on distressed debt”.
Another person privy to the development reportedly said that Glas Trust no longer meets the required threshold to pursue its claims against BYJU’S due to lender disqualifications. “The obligation of the parent company to repay the loan as a guarantor would only arise upon a legitimate acceleration, which has not yet been established,” added the source.
Meanwhile, a spokesperson for the steering committee of the TLB lenders told ET, “Mr Pankaj Srivastava’s actions are unprecedented and entirely illegitimate as no interim resolution professional in the history of the Insolvency and Bankruptcy Code of India has ever attempted to unlawfully strip financial creditors of claims of this magnitude amounting to more than $1.35 Bn without any legitimate reason and in doing so securing his appointment as the permanent resolution professional.”
The spokesperson further added, “The term loan lenders are hopeful that this wrongful conduct will not be permitted to prevail and will ensure that such blatant mistreatment does not go unchallenged”.
For the uninitiated, the edtech major raised a $1.2 Bn TLB in 2021. Subsequently, as its losses mounted and capital dried up due to funding winter, the company halted payments and filed a suit against its creditors.
On the other hand, its US lenders have accused the company’s founder and CEO Byju Raveendran of diverting more than $500 Mn from the TLB corpus. The creditors have even filed a bankruptcy case against the company’s American arm, BYJU’S Alpha, in the US.
Mounting further offence in a bid to claw back the funds, the consortium of creditors also appealed before the Supreme Court (SC) to quash an INR 158 Cr settlement between the edtech firm and the Board of Control for Cricket in India (BCCI) in connection with the edtech’s insolvency proceedings. Last month, the SC revived the insolvency proceedings against the embattled startup.
BYJU’S, once the darling of investors, spent millions of dollars on acquiring companies, launching an advertising blitzkrieg and expanding operations at the height of the pandemic. However, growth stagnated as schools reopened.
Meanwhile, a funding crunch deepened the crisis at the company, forcing BYJU’S to layoff employees in droves, cut corners and shut down offline centres. Making matters worse is the bevy of legal cases, mounting losses, a public spat with investors and delayed salaries of employees for months.
