BYJU'S takes legal action against expedited loan, seeks to disqualify lender Redwood for predatory tactics

BYJU’S said it cannot be expected to, and has chosen not to, make any additional payments to the term loan B lenders, including interest, until the dispute is resolved by the court.

BYJU'S takes legal action against expedited loan, seeks to disqualify lender Redwood for predatory tactics

Tuesday June 06, 2023,

3 min Read

BYJU'S has submitted a complaint to the New York Supreme Court to contest the acceleration of the $1.2-billion term loan B (TLB) and seek disqualification of lender Redwood. BYJU'S alleges that Redwood has engaged in a series of predatory tactics.

The edtech unicorn said that despite the terms of the TLB, Redwood, predominantly involved in distressed debt trading, acquired a substantial portion of the loan. 

The Bengaluru-headquartered firm also noted that the TLB lenders wrongfully enforced the acceleration of the loan based on alleged non-monetary and technical defaults.

“On the back of this unconscionable acceleration of the TLB, the TLB lenders undertook unwarranted enforcement measures including seizing control of BYJU’S Alpha and appointing its own management. 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,” BYJU’S said in a statement.

The edtech firm added that, during the Delaware proceedings, the TLB lenders made an unsuccessful attempt to deny BYJU'S its contractual right to "disqualify" lenders who primarily engage in opportunistic trades.

“The Delaware court rejected this attempt, ruling that the TLB lenders 'have not demonstrated either irreparable harm or the balance of the harms as required to support a provision restraining' this contractual right of BYJU’S,” it noted.

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Following these actions, BYJU'S said it was compelled to initiate legal proceedings to challenge the acceleration. 

Additionally, it has served a notice to the Redwood entities, disqualifying them. Upon the implementation of such disqualification, Redwood would be prohibited from exercising crucial rights stipulated in the TLB.

BYJU’S noted that it “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”.

This development comes a day after BYJU’S was expected to make a quarterly interest payment of about $40 million on the loan to meet the June 5 deadline, a Bloomberg report noted.

Earlier, another Bloomberg report said that BYJU'S lenders have abandoned discussions with the edtech company on the $1.2-billion loan restructuring. This was the biggest TLB being placed by an Indian startup at the time of the raise, but the loan was unrated.

BYJU’S said it maintains its willingness to engage in discussions with the TLB lenders and is “ready, willing and able to continue making payments under the TLB” if the lenders “withdraw their ill-conceived actions and honour the terms of the agreement”.

Recently, BYJU'S secured $250 million in fresh funding through structured instruments, maintaining a steady valuation of $22 billion. The company is expected to finalise an additional $700 million from a sovereign fund at the same valuation.

However, BlackRock recently marked down the valuation of its stake in BYJU'S by 62% as of March 31, 2023, resulting in a revised valuation of approximately $8.4 billion for BYJU'S.

BYJU’S, which is yet to file its financials for FY22, reported a loss of Rs 4,564.38 crore in FY21—much bigger than its FY20 loss, which stood at Rs 305.5 crore.