The Delaware Supreme Court, in a ruling on September 23, upheld a previous decision that declared Byju's in default on its $1.2-billion Term Loan B, marking another challenge for the troubled Indian edtech firm. This decision by the US court aligns with the judgment by the Delaware Court of Chancery, permitting Byju's lenders, represented by Glas Trust LLC, to assume control of Byju’s Alpha Inc., the company's US subsidiary that was used as collateral for the loan.
Lenders have appointed Timothy Pohl as the sole director of Byju Alpha Inc for the purpose.
“We are gratified that the Delaware Supreme Court decisively affirmed what we have known all along: Byju’s breached and defaulted on the credit agreement it knowingly and willingly entered into," the lenders said in a statement.
"Most notably, this ruling confirms that Byju’s was in default, which both Byju (Raveendran) and Riju personally acknowledged when they signed multiple amendments to the credit agreement on Byju’s behalf between October 2022 and January 2023,” the statement said, referring to the edtech company's founder and his younger brother.
“As such, and as validated by the Delaware Supreme Court, the lenders were well within their contractual rights to accelerate the term loan and take control of Byju Alpha Inc.,” the lenders said.
Byju’s was granted a $1.2 billion loan by a consortium of 37 financial institutions, with a loan agreement that empowered Glas Trust to act on behalf of the lenders in the event of default. In March 2023, a default notice was issued to Byju’s by the lender when the company could not reach a renegotiation of the loan terms. Subsequently, Glas moved to take control of Byju's Alpha Inc.
In August 2023, the Delaware Court of Chancery ruled in favor of Glas, upholding the lenders' right to enforce the agreement. The court determined that Byju’s had breached its financial obligations, giving justification to the lenders' action in assuming control of Byju's Alpha Inc. through written consent.
Byju's filed an appeal with the Delaware Supreme Court, contending that the lawsuit should be dismissed because of a pending case in a New York court. The Supreme Court, however, denied this argument, noting that the Indian company waived its right to raise the issue by not doing so earlier in the proceedings.
The Delaware Supreme Court ruled that the series of amendments to the credit agreement, entered into between October 2022 and January 2023, make it clear that Byju’s voluntarily conceded both that events of default occurred and the consequences thereof, namely GLAS’s legal entitlement to exercise remedies. (GLAST is the trustee for lenders to which Byju's owes $1.2 billion).
In a separate statement, the lenders said: “Byju has attempted to concoct an alternate narrative that Byju’s did not default and to place the blame for the company’s failure on others, rather than repaying the lenders the money that is rightfully owed to us, including disclosing what happened to the $533 million of missing loan proceeds.”