SUMMARY
BYJU’S’ lawsuit against its term loan lenders is simply an effort to avoid complying with its obligations, including making contractually required payments, the group of lenders said
The response comes soon after the edtech decacorn filed a complaint against the acceleration of the $1.2 Bn Term Loan B (TLB)
In the event BYJU’S intentionally remains in default, the lender group reserves all rights available to it to enforce the credit agreement: Lenders
A group of ad hoc term loan lenders have responded to a recent lawsuit filed by edtech giant BYJU’S and termed it ‘meritless’. These lenders collectively own more than 85% of the BYJU’S $1.2 Bn term loan.
“BYJU’S’ meritless lawsuit against its term loan lenders is simply an effort to avoid complying with its obligations, including making contractually required payments,” the group said in a statement.
The response comes soon after the edtech decacorn filed a complaint against the acceleration of the $1.2 Bn Term Loan B (TLB) and to disqualify Redwood as a lender.
“The lender group, comprised of 21 highly respected global institutional investors, has sought to work constructively with the company over the past nine months to cure its numerous defaults and will continue to do so in good faith. However, in the event BYJU’S intentionally remains in default, the lender group reserves all rights available to it to enforce the credit agreement,” it said.
Houlihan Lokey serves as financial advisor to the term loan lender group and Kirkland & Ellis LLP, Cahill Gordon & Reindel LLP, and Shearman & Sterling LLP are serving as legal advisors.
Earlier this week, BYJU’S issued a notice to Redwood and its entities, disqualifying them. As per BYJU’S, once the disqualification takes place, the lender would be restrained from exercising critical rights under the TLB.
Further, it claimed 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.
The edtech platform raised a TLB of $1.2 Bn in 2021. The creditors asked it to immediately repay a part of the loan when the unicorn began renegotiations for the terms of the debt. Recently, the lenders also sought a prepayment of $200 Mn, along with a higher interest rate, as a precondition to restructure the TLB.
As per reports, BYJU’S had agreed to raise the interest rate on the TLB by 200 basis points. However, even as the lenders have been seeking a faster repayment of the term loan B since December 2022, BYJU’S has yet to agree on the prepayment clause.
In its latest lawsuit, BYJU’S further stated that the lenders seized the control of BYJU’S Alpha and appointed their own management, calling the acceleration of the TLB ‘unconscionable’,
“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 edtech said.
The development comes at a time when BYJU’S is struggling with mounting losses which rose nearly 20X year-on-year (YoY) to INR 4,588 Cr in the financial year 2020-21 (FY21), compared to INR 231.69 Cr in FY20. BYJU’S revenue from operations grew only 4% to INR 2,280 Cr in FY21 from INR 2,189 Cr in the previous fiscal year. It is yet to file its FY22 report.
US-based investment management firm BlackRock, which owns less than 1% stake in the unicorn, recently slashed its valuation by 61.9% in the quarter ending March this year to $8.36 Bn from $22 Bn earlier.
Despite the valuation markdowns and struggle to achieve profitability, BYJU’S managed to raise $250 Mn in a debt round through structured investments from US-based alternative investment firm Davidson Kempner last month.
