BYJU’S Term Loan B Saga: Now, Lenders Initiate Bankruptcy Proceedings Against Epic!, Other Guarantors

In more problems for embattled edtech startup BYJU’S, the ad hoc group of lenders of its Term Loan B has initiated insolvency proceedings against three of the edtech giant’s guarantors for the loan in the Delaware district bankruptcy court.

In a statement, the lenders said they have filed petitions under Chapter 11 of the US Bankruptcy Code to initiate involuntary Chapter 11 proceedings against Epic!, Neuron Fuel, and Tangible Play, the three US-based guarantors for the Term Loan B availed by BYJU’S beleaguered subsidiary, BYJU’S Alpha.

Involuntary bankruptcy cases require a company to put itself into court protection or fight the creditors in court. Redwood Capital Management, Veritas Capital and loan agent Glas Trust filed the latest petition, Bloomberg reported citing court papers.

“Since BYJU’S began to default on its Term Loan obligations shortly after we provided BYJU’S Alpha with financing in 2021, we have made every effort possible to work productively and collaboratively to help BYJU’S cure its multiple defaults. However, it is clear that BYJU’S management has no intention or ability to honour its obligations under the Term Loans,” the ad hoc group said in the statement.

It again alleged that BYJU’S founders Byju Raveendran, Riju Ravindran, and Divya Gokulnath unlawfully ‘diverted’ $533 Mn in loan proceeds, which is still being contented by the edtech giant in a Delaware court.

The lenders added that the move to file Chapter 11 petitions was to ‘protect and preserve’ the value of Epic!, Neuron Fuel, and Tangible Play. 

“We remain committed to their success and stand ready to infuse the capital necessary to reorganise the businesses. Under [the] supervision of the court, the lenders hope that Epic!, Neuron Fuel, and Tangible Play will benefit from much-needed oversight…,” the lenders added.

The lenders have also created a website, inviting former employees, students and vendors of Epic!, Neuron Fuel, and Tangible Play to anonymously share their experiences, including whether they are owed any outstanding debt, in dealing with the three businesses and their leadership.

Inc42 has reached out to BYJU’S seeking its comment on the latest development. The story will be updated upon receiving a response from them. 

The development comes one day after the US-based asset management firm Baron Capital reduced the fair value of its investment in the edtech firm BYJU’S by 99.85%. The move from the ad hoc group of lenders also comes after they sought directions from the National Company Law Tribunal (NCLT) in May to restrain the edtech from pledging, selling or transferring shares.

The Case Of The $533 Mn

Since court proceedings began in Delaware in March 2023, the ad hoc group of lenders have accused BYJU’S founders of moving out $533 Mn from the loan proceedings to an unknown location. 

In February 2024, BYJU’s Alpha filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware, including to investigate and resolve claims related to the $533 million in missing loan proceeds.

The lenders and the company continue to be involved in the legal battle about where the $533 Mn has been parked. In May this year, the Delaware Court found Riju Ravindran to be in contempt following his repeated refusal to disclose or ascertain the location of the $533 Mn in loan proceeds.