Lenders of Byju’s Alpha filed an insolvency petition after the Indian education startup missed payment on a $1.2 billion loan, according to people with knowledge of the matter.
The filing was made this week to a National Company Law Tribunal (NCLT) in India, the people said, asking not to be identified as the document isn’t public yet.
“The validity of lenders’ actions, including acceleration of the term loan, is pending and under challenge in several proceedings, including before the New York Supreme Court. Hence, any proceedings by lenders before NCLT are premature and baseless,” Byju’s said in an emailed response.
A representative for the lenders’ group didn’t immediately respond to an email seeking comments. Moneycontrol reported the development earlier.
The company, founded by former teacher Byju Raveendran and once valued at $22 billion, has been locked in a legal dispute with creditors over the missed payment.
Raveendran attracted capital from some of the biggest investors in the tech world, including Mark Zuckerberg’s Chan Zuckerberg Initiative, Silver Lake Management and Naspers Ltd. But the online tutoring firm lost money after a pandemic-era boom in business dried up. Raveendran, pledged his home as well as those owned by his family members to raise money for paying employees, Bloomberg reported in December citing people familiar with the matter.
Byju’s Alpha is a holding company that the lenders need to control to protect their rights, a creditors’ lawyer told a Delaware Court earlier this year. The creditors accused the company of hiding $533 million in an obscure hedge fund, according to court filings.
Lawyers for Byju’s have said the distressed-debt lenders are “playing hardball” to create leverage in negotiations.
The Byju's spokesperson in a statement later said:
“As we have stated before, the validity of lenders’ actions, including acceleration of the term loan, is pending and under challenge in several proceedings, including before the New York Supreme Court. Hence, any proceedings by lenders before NCLT are premature and baseless.
Surprisingly, the acceleration and consequent actions by the lenders appear to be based, in part, on the failure of Whitehat Education Technology Pvt. Ltd, a wholly owned subsidiary of Think & Learn, to guarantee the term loan. This is despite the fact that provision of such guarantee would contravene extant RBI regulations. In fact, proceedings are on foot before the Delaware appellate courts on this very issue.
Previously too, the lenders have made unsuccessful attempts to interfere with BYJU’S rights to deal with capital provided under the loan agreement. The Delaware Chancery Court has rightfully refused to let the lenders do so, and lenders’ subsequent attempts on this front have been unsuccessful.
Incidentally, the Delaware court has also refused to interfere with BYJU’S rights to disqualify distressed asset fund lenders under the loan agreement - who continue to take these steps in an attempt to get BYJU’s to succumb to their extortionate demands.
In good faith and on a continuous basis, BYJU’S has been in regular touch with the lenders and has also involved them in the sales process of some of its prized US subsidiaries to settle matters.
The timing of these proceedings is also conspicuous as it coincides with the commencement of a rights issue by the parent company of BYJU’S.
The initiation of this legal process does not reflect the true financial standing of our company, nor does it accurately represent our ability to meet our obligations. We firmly maintain that we are a resilient, viable entity that is incrementally charting a path towards sustainable growth.
As always, we remain committed to a constructive dialogue aimed at a mutually beneficial and amicable resolution of matters.”
