US lenders of Byju’s approach court to put more subsidiaries in bankruptcy: Report

In mounting troubles for edtech startup Byju’s a group of lenders in the US has approached court to impose bankruptcy oversight on multiple units tied to the struggling company claiming millions of dollars are being “siphoned” out of the companies, Bloomberg reported.   

Creditors led by HPS Investment Partners filed involuntary Chapter 11 cases in Delaware against Neuron Fuel Inc., Epic! Creations Inc. and Tangible Play Inc. on June 6. All three were once affiliated with Byju’s Alpha, a unit of the startup that was put into bankruptcy earlier this year after defaulting on a $1.2 billion loan.  

The lenders have accused Byju Raveendran, founder of Byju’s, of violating their debt contracts by refusing to give them financial details about the three subsidiaries facing bankruptcy. The units should have their spending restricted immediately and eventually a trustee may need to be appointed to run them, the lenders said in court papers, according to the Bloomberg report.  

Byju’s plans to challenge the case.   

“The lenders claim to be creditors of these entities, notwithstanding that the question of whether the underlying loan amount is due and payable remains to be decided,” a company spokesperson said in an email, referring to a lawsuit challenging whether the $1.2 billion loan is in default. 

In May, the US-based lenders of Byju’s urged the National Company Law Tribunal (NCLT) to restrain it from pledging, selling or transferring its shares.  

The lenders have filed the insolvency plea through US-based non-bank loan agency Glas Trust Company LLC. They told the tribunal on Wednesday that Byju's was borrowing more money and alienating its shares in exchange, thereby “causing grave prejudice to them”.  

Over 100 lenders had loaned money to Byju's US entity, Byju’s Alpha Inc, which is undergoing a voluntary bankruptcy process in a Delaware court.  

In the last week of May, Byju’s assured employees of clearing salaries and statutory dues based on cash flow. The CTO shared commitments from the townhall with founder Byju Raveendran, including paying February and March salaries by June 30 (worst case July 8). Employees were also assured in a professional tone.