Byju’s sues term loan lender; won’t make further payments – Times of India

NEW DELHI: In a fresh turn of events, Byju’s on Tuesday said that it has filed a suit in the New York Supreme Court to challenge acceleration of the $1.2 billion term loan B (TLB) and to disqualify lender Redwood who the firm alleged, purchased a significant portion of the loan while primarily trading in distressed debt with the intent of making windfall gains. Byju’s said that “a series of predatory tactics” undertaken by the lenders, led by Redwood pushed it to make such a move. Once the disqualification of the Redwood entities takes effect, Redwood would be restrained from exercising critical rights under the TLB.
The development comes a day after reportedly a deadline for Byju’s to make a $40 million quarterly interest payment on its $1.2 billion loan lapsed. However, given that legal proceedings are now on foot both in Delaware and New York, the entire TLB is disputed. The edtech major asserted 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.
Byju’s said that in early March, 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, claiming that a recent move by the lenders to take the startup to a Delaware court didn’t fructify as the court rejected attempts by the lenders to deprive Byju’s of its contractual right to disqualify lenders engaged in opportunistic trades.
“Despite this, the TLB lenders continued to conduct themselves in a high-handed manner. They issued a notice demanding immediate payment of the entire amount under the TLB, despite knowing that this purported acceleration was under challenge before the court,” Byju’s said. The company that has of late been grappling with a spate of challenges reiterated that its financial health remains robust and is willing to continue making payments under the TLB if the lenders withdraw their ill-conceived actions and honour the terms of the agreement.
Executives at Byju’s said that the firm’s investors have appreciated the company for making such a bold move. “It’s a brave move to stand up on our feet and then call out the bluff and call out the kind of a treatment which was meted out, which was not at all appropriate and we kept on putting up with it for a long time. They were not just hurting us as a company but also the Indian startup ecosystem,” a top executive said on condition of anonymity, adding that nobody likes dispute and the firm will try to work on reaching a resolution.