BYJU’s lenders reportedly created bogus default claims tied to a $1.2 billion loan in a bid to take control of the crisis hit education-technology provider, Bloomberg News reported on Saturday.
The report stated that debt lenders are “playing hardball” to create leverage in negotiations to restructure the loan, which is creating hurdles for Byju’s executives, Sheron Korpus, representing BYJU’s, said at a hearing in state-court in Delaware on Friday.
Lenders, including US-based firms Redwood Investments LLC and Silver Point Capital LP, are making “extortionate demands” of BYJU’s, putting the ed-tech firm “under a lot of pressure,” Korpus told Delaware Chancery Court Judge Morgan Zurn on Friday.
Korpus demanded that the judge should rebuff the lenders’ default claims. To this, Judge Zurn said she would rule later on the case.
In May, Alpha Inc, one of BYJU’S companies in the US, was taken to the Delaware court in relation to recovery of $1.2 billion.
Alpha Inc faces a lawsuit from an agent acting on behalf of lenders who are owed $1.2 billion. The suit was lodged by Glas Trust Company and investor Timothy R. Pohl, naming BYJU’S Alpha, Tangible Play, Inc., and Riju Ravindran as defendants.
Ravindran is the director of Alpha Inc. The lawsuit has been filed as Glas Trust Company vs Riju Ravindran, 2023-0488, Delaware Chancery Court (Wilmington).
Earlier this year, a proposal by the company to revise its debt by increasing the interest rate on its $1.2 billion term loan due 2026, faced resistance from lenders. A lenders’ steering committee suggested an alternate plan of repaying part of the loan and securing cash.
The ed-tech company failed to sign off on an amendment by an August 3 deadline that would have ended legal action in the US.
For several months now, crisis-hit BYJU’s and lenders have been negotiating over the loan, after the company breached debt covenants.
On Friday, Korpus said BYJU’s officials are in ongoing talks with lenders to amend the loan’s terms, adding that the firm “still wants to make a deal” to resolve the dispute.
But lenders are trying to use the bogus default claims to wrongfully “seize control” of Byju’s from its founder, Korpus further noted.
Back in the country, Think & Learn, the parent company of edtech major Byju’s, has decided to reconstitute the board of Aakash Educational Services Ltd. (AESL). The edtech major has appointed three nominees from Think & Learn and two independent directors.
“The AESL board is being strengthened with three Think and Learn (Byju’s) nominees and two independent directors,” said Byju’s spokesperson, who did not disclose the names of the new board members.
In 2021, Byju’s acquired Aakash Educational Services for about $940 million in a cash and stock deal. It was a 70:30 cash-equity deal, under which the promoters of Aakash and Blackstone would receive an undisclosed stake in Byju’s for 30 per cent of the payment. However, Aakash shareholders have been reluctant to execute the share swap due to Byju’s declining value.
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Byju’s has sent a legal notice to the founders of Aakash following their alleged resistance to complete a share swap that was unconditionally agreed to as part of the sale.
