Shot In the Arm For BYJU’S: US Court Rejects Lenders’ Plea To Probe $500 Mn Fund Transfer

In a major relief for BYJU’S, a Delaware Court has rejected a plea filed by its $1.2 Bn term loan B creditors seeking a probe into transfer of $500 Mn from the edtech giant’s US-based subsidiary BYJU’S Alpha to other entities, a source told Inc42.

Without giving any additional information, the source said the court passed the order in favour of the troubled edtech giant.

BYJU’S refused to comment on the development.

Meanwhile, news agency PTI cited sources as saying, “Rejecting the lenders’ application for information in relation to the $500 Mn (part of the funds received by BYJU’S Alpha), the Vice Chancellor remarked that lenders had no basis to further investigate the transfer.” 

The court ruled that the lenders failed to demonstrate ‘either irreparable harm or the balance of the harms as required to support a provision’ restraining the contractual right of BYJU’S to ‘disqualify’ lenders engaged primarily in opportunistic trades, the report said.

A source close to the company said that the court has put a stop to the lenders’ “unwarranted fishing expedition” and attempts to introduce a non-issue into the proceedings, which was limited to determining the control of BYJU’S Alpha.

“Plaintiff may rely on Ravindran’s reaction as evidence that he perceived an Event of Default has occurred, and for other admissible purposes, but Plaintiff has no basis to further investigate the transfer itself in this action,” added the order copy seen by PTI. 

It is pertinent to note that the petition was filed by a clutch of BYJU’S TLB lenders via their agent GLAS Trust Company. 

Inc42 has also reached out to GLAS Trust Company for comment. This story will be updated with the comment when it is received.

The order comes as a major relief for the edtech decacorn which is in the midst of a potential debt crisis. Earlier this month, BYJU’S skipped an instalment for its term loan B. Right afterwards, the company also moved the New York Supreme Court to challenge the acceleration of its loan and seek disqualification of one of its creditors, Redwood. 

BYJU’S alleged that Redwood ‘consistently increased its exposure by acquiring a sizable stake in the TLB with the intent of making windfall gains’. It also claimed that the lenders were consistently taking measures to tarnish its reputation. 

BYJU’s also alleged that the agents of TLB lenders also even refused to provide identities of the creditors to the company despite being entitled to the information under the contours of the agreement. 

The reprieve comes amid a long spell of bad news for BYJU’S. Last week, it saw the exit of its statutory auditor Deloitte and three high-profile board members – GV Ravishankar of Peak XV Partners, Prosus’ Russell Dreisenstock and Vivian Wu of Chan Zuckerberg Initiative.

Meanwhile, as the heat turns up on multiple fronts, BYJU’S is now reportedly on the lookout to raise an additional $1 Bn from new investors.