A group of ad hoc term loan lenders, who collectively own more than 85% of BYJU’S $1.2-billion term loan, has issued a statement saying the edtech firm’s lawsuit against them is “meritless” and “simply an effort to avoid complying with its obligations, including making contractually required payments”.
“The lender group, comprising 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 that BYJU’S intentionally remains in default, the lender group reserves all rights available to it to enforce the credit agreement,” the lender group said in a statement.
When contacted by DealStreetAsia, BYJU’s declined to comment on the matter.
This comes less than a week after BYJU’s filed a complaint in the New York Supreme Court to challenge the accelerated $1.2-billion Term B Loan (TLB) and disqualify Redwood, alleging that it purchased a significant portion of the loan in violation of TLB terms, primarily engaging in distressed debt trading.
The edtech giant said it has had to take the measures following a series of “predatory tactics by the lenders, led by Redwood”.
In a court complaint dated May 23 reviewed by DealStreetAsia, the lenders said they were forced to exercise remedies following repeated—and conceded—events of default arising from BYJU’s Alpha’s (and its guarantors’) breaches of multiple covenants within the Credit Agreement, along with their failure to make good on any of their repeated promises to address these Events of Default and the Lenders’ concerns regarding their collateral.
The lender said the company has consistently failed to provide audited financial statements for the fiscal year ending March 31, 2022, as well as complete unaudited financial statements for multiple quarters. As a result, the Lenders lack updated financial information on their billion-dollar-plus loan facility, with the most recent verified data being over two years old (as of March 31, 2021).
The lenders also allege that the Loan Parties, controlled by founder Byju Raveendran, have violated the terms of the Forbearance Agreement by failing to provide the requested weekly updates on cash balances, cash equivalents, marketable securities, and transactions in material US bank accounts.
According to the court complaint, on March 3, 2023, the lenders exercised remedies by issuing a formal Notice of Events of Default and Acceleration through GLAS. As a result, over $1.255 billion became immediately due and payable, representing the entire outstanding principal, accrued interest, premiums, and fees. Although one scheduled amortization payment was received on March 31, 2023, it did not alter the prior acceleration of the term loan.
The Lenders made amendments and waivers starting in April 2022 to protect their interests and minimize disputes. However, Raveendran failed to fulfill his obligations and disregarded key provisions of the Credit Agreement, causing the Lenders’ concerns to grow, per the court document.
Eventually, on January 6, 2023, a forbearance agreement was signed, the report said, acknowledging multiple Events of Default and granting the Lenders the right to accelerate the remaining term loan. In exchange for the Lenders’ forbearance, Raveendran admitted that the specified defaults could only be waived by the Required Lenders.
Efforts to gather information have been made, including notifying financial institutions and requesting access to records, which has been denied, the complaint read.
The lenders allege that Raveendran initially disregarded the exercise of remedies and threatened to have BYJU’s Alpha retaliate against the lenders by classifying them as “Disqualified Lenders” and potentially buying out certain Lenders at a discounted price.
However, Raveendran later approached the Lenders seeking a negotiated resolution. The negotiation process faced delays, with Raveendran’s representatives intentionally stalling progress. Raveendran’s own counsel requested a detailed summary of changes to the Credit Agreement, which the Lenders’ counsel provided promptly.
Raveendran’s counsel finally shared comments on the amendment but omitted crucial provisions.
At the time, Raveendran was finalising substantial investments in his companies. The Lenders demanded a specific timeline for finalising and signing the amendment, but Raveendran initially refused, leading the Lenders to consider public disclosure of material information.
The plaintiffs have also sought a status quo order that would prevent BYJU’s Alpha from dissipating its cash and other assets, including to its overseas direct and indirect parent companies and founder, or otherwise retaliating against the Lenders’ lawful exercise of remedies.