Byju’s term loan lenders initiate insolvency resolution proceedings against the firm

MUMBAI: In yet another setback for Byju’s, its foreign term loan lenders have filed a petition to initiate corporate insolvency resolution proceedings against the firm. The petition has been filed with the Bengaluru bench of the National Company Law Tribunal (NCLT), a representative of the lenders confirmed to TOI in a mailed response.

The failure on part of Byju’s to honour its obligations under the term loan necessitated the move, the lenders said in a statement issued in the evening.

“The myriad issues facing Byju’s are entirely self-inflicted. For months, we sought to avoid this exact situation, repeatedly attempting to engage constructively with Byju’s management and other stakeholders and providing them with multiple paths to reach a mutually agreeable resolution, even after the Delaware court confirmed the validity of Byju’s defaults. It is our belief now that Byju’s management has no intention or ability of honouring its obligations under the term loans,” the ad hoc group of term loan lenders said.

Byju’s confirmed the development, terming the NCLT proceedings by lenders as “premature and baseless.”

Byju’s and its lenders have been engaged in a long-drawn dispute over the repayment of its $1.2 billion term loan B which eventually reached the courtroom and escalated into a legal spat. The Bengaluru-based startup which had raised the loan in 2021 to fund its overseas expansion defaulted on loan payments amid a liquidity crunch and failed to make any significant headway in terms of renegotiating the loan terms with lenders.

“As we have stated before, the validity of lenders’ actions, including acceleration of the term loan is pending and under challenge in several proceedings, including before the New York Supreme Court. Hence, any proceedings by lenders before NCLT are premature and baseless,” Byju’s said in a statement.

In June last year, Byju’s missed a $40 million quarterly interest payment on the loan and instead sued the lenders in the New York Supreme Court, challenging acceleration of the TLB. The lenders who have earlier accused Byju’s of hiding about $533 million in loan proceeds in an obscure hedge fund in the US added that the Delaware Chancery Court recognised that the startup had defaulted on its loan obligation and found that the lenders were within their contractual rights to replace the sole director of Byju’s Alpha (US subsidiary set up to receive the loan) with their representative.

The lenders said that successful restructuring of the term loan would have immediately solved for the loan’s numerous outstanding defaults and ended all open litigation.

Byju’s said that the timings of these proceedings is also conspicuous as it coincides with the commencement of a rights issue by the firm. “…..in good faith and on a continuous basis, Byju’s has been in regular touch with the lenders and has also involved them in the sale process of some of its prized US subsidiaries to settle matters,” the startup said.

Earlier this week, the startup revealed consolidated losses to the tune of Rs 8,245 crore for FY22. The startup’s auditor cited the firm’s losses and dispute with lenders over the repayment of a $1.2 billion TLB as “material uncertainty” which “may cast significant doubt on Group’s ability to continue as a going concern.” Once a celebrated startup, Byju’s valuation has been slashed to $1 billion in a recent markdown.