Byju’s has filed a lawsuit against the lenders in the New York Supreme Court against the acceleration of a US$ 1.2 billion Term Loan B (TLB) and the disqualification of Redwood. The move comes in response to what BYJU’S claims to be a series of predatory tactics employed by the lenders, led by Redwood.
“Byju’s has taken the decisive action to file a complaint in the New York Supreme Court to challenge acceleration of the US$ 1.2 billion Term Loan B (TLB) and to disqualify Redwood Capital Management, who contrary to the terms of TLB, purchased a significant portion of the loan while primarily trading in distressed debt,” the company said in a statement.
The company also said that it had taken these measures following a series of “predatory tactics” by the lenders, led by Redwood. These tactics, according to Byju’s, included threatening to seize the company’s assets and demanding that it make early repayments on the loan.
Apart from the TLB lenders, BYJU’s also has its grievances against Redwood, a lender known for trading in distressed debt. Redwood has been consistently increasing its stake in the TLB, aiming to profit from the situation.
BYJU’S noted that it has issued a notice disqualifying the Redwood entities, which would restrict their exercise of critical rights under the TLB.
It is worth noting that BYJU’S has stopped making further payments towards its Term Loan B, including the interest amount, claiming that the ongoing legal proceedings have led to the loan being disputed.
Byju’s has been in default of the loan agreement because of its failure to file FY22 financial statements by September 2022 – a key covenant in the agreement it signed while raising the TLB. The company has so far called it a “technical” default, noting that it had made all the coupon payments on time and was not in monetary default.
Separately, it had been in a fight in Delaware with the lenders. On May 19, the lenders accused Byju’s of draining its US entity Byju’s Alpha of the $500 million. The edtech at the time defended its actions at the time saying that it was legal and not in breach of its agreements. At the time, Byju’s said “ it has fulfilled its contractual payment obligations as agreed upon in the term loan B signed in 2021 and has not missed a single payment. There have been no monetary defaults on the loan. The lenders’ allegations (which we dispute) concern merely insignificant technical and non-monetary defaults.”
Byju’s is backed by investors like Chan-Zuckerberg Initiative, Naspers, CPPIB, General Atlantic, Tencent, Sequoia Capital, Sofina, Verlinvest, IFC, Aarin Capital, TimesInternet, Lightspeed Ventures, Tiger Global, Owl Ventures & Qatar Investment Authority.
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