BYJU’S lenders consortium on lawsuit: ‘Meritless’ action to avoid payments

A group of ad hoc term loan lenders, who collectively own more than 85 per cent of BYJU’S $1.2-billion term loan, issued a statement in response to the lawsuit the edtech firm filed in the US, calling it a meritless action to avoid repayment. 

“BYJU’S’ meritless lawsuit against its term loan lenders is simply an effort to avoid complying with its obligations, including making contractually required payments. The lender group, comprised of 21 highly respected global institutional investors, has sought to work constructively with the company over the past nine months to cure its numerous defaults and will continue to do so in good faith. However, in the event BYJU’S intentionally remains in default, the lender group reserves all rights available to it to enforce the credit agreement,” the statement said. 

The Bengaluru-based company had initiated legal action in the Supreme Court of the State of New York County of New York against the acceleration of a $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. 

The company said the lenders unlawfully accelerated their account and tried to take control over the BYJU’S entity BYJU'S Alpha by appointing their own management at the company. 

“On 3 March 2023, the TLB lenders unlawfully accelerated the TLB on account of certain 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,” the company said in a statement. 

BYJU’S had stopped making further payments towards its TLB, including the interest amount, claiming that the ongoing legal proceedings have led to the loan being disputed. 

“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. In the Delaware proceedings, the TLB lenders (unsuccessfully) attempted to deprive BYJU’S of its contractual right to ‘disqualify’ lenders engaged primarily in opportunistic trades,” the statement added. 

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.