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BYJU'S Alpha faces allegations of concealing $500M from lenders amid control dispute: Report

Lenders have accused BYJU'S Alpha of hiding $500 million from during a court dispute over control.

BYJU'S Alpha faces allegations of concealing $500M from lenders amid control dispute: Report

Friday May 19, 2023 , 3 min Read

BYJU'S Alpha has been accused by lenders of concealing $500 million amid an ongoing court dispute over control of the company in Delaware. The lenders argue that due to a previous default, they have the authority to appoint their representative, Timothy R Pohl, as the company's leader.

"This is an interim order of a Delaware Court to maintain status quo in relation to BYJU'S Alpha, a non-operative US entity set up to receive the Term Loan B, with no employees. The litigants have made bewildering claims that BYJU'S “moved” $500 million from BYJU'S Alpha, insinuating that these acts were somehow wrongful," BYJU'S told YourStory in a statement.

"In fact, even lenders have not alleged that the transfer was not permitted under parties’ existing contractual arrangement," it added.

The company asserts that the transfer was within its rights as outlined in the Term Loan B agreement, which was intended for driving growth in its global operations.

BYJU'S Alpha also said it fulfilled all contractual payment obligations under the loan, with no monetary defaults. The company disputes the lenders' allegations, characterizing them as insignificant technical and non-monetary defaults.

The company had been working on resolving issues with creditors in relation to a $1.2 billion term loan, and in April, government investigators conducted a search of BYJU'S offices. BYJU'S has been diligently working towards an initial public offering for its tutoring unit for several years.

During this recent standoff between the two parties, a senior manager at BYJU'S Alpha purportedly confessed to transferring $500 million out of the company, as revealed by Brock Czeschin, one of Pohl's attorneys, during the telephone hearing, according to reports.

YourStory was unable to independently verify this report.

BYJU'S Alpha's defense, presented by lawyer Joe Cicero, argued that the company had taken this action to safeguard the funds from predatory lenders. According to Cicero, BYJU'S Alpha was within its rights to make the transfer, as stipulated in the loan agreement.

Earlier in April, Byju Raveendran, the CEO of BYJU'S, revealed during an online event that the company is considering refinancing a portion of its $1.2 billion term loan B (TLB) through equity financing.

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Speaking at a DealStreet Asia webinar, Raveendran expressed confidence in the company's financial position, highlighting that the debt's maturity date is set for November 2026, providing ample time for exploration of refinancing options through equity rounds, especially in the current high-interest rate environment.

Recent reports also confirmed the successful completion of an equity funding round, raising $700 million at a consistent valuation of $22 billion. The funding round, led by two sovereign wealth funds from West Asia and a private equity fund, allocated approximately $500 million for debt repayments.

In November 2021, lenders of term loan B made a request to BYJU'S for a $200 million prepayment in lieu of restructuring the debt. The company engaged in discussions with creditors to potentially raise the interest rate by up to 300 basis points. This adjustment would be in addition to the existing floating interest rate of 550 basis points, which is calculated based on the Libor plus margin.

(This story has been updated to reflect a comment from BYJU'S)