Byju’s, India’s leading edtech company, has recently filed a lawsuit in the New York Supreme Court challenging the acceleration of a $1.2 billion term loan B (TLB) and seeking to disqualify lender Redwood. Byju’s alleges that Redwood, primarily engaged in distressed debt trading, purchased a significant portion of the loan with the intention of making excessive profits. Consequently, Byju’s has decided to withhold further payments to the TLB lenders until the court resolves the dispute. The company stands firm, asserting that its financial position remains strong and expressing a willingness to honor the agreement if the lenders withdraw their contentious actions.
In a surprising development, Byju’s announced on Tuesday its decision to take legal action against the acceleration of a $1.2 billion term loan B (TLB) and disqualify the lender, Redwood. Byju’s filed a lawsuit in the New York Supreme Court, claiming that Redwood, known for trading in distressed debt, acquired a significant portion of the loan to exploit it for substantial gains. The edtech giant accused the lenders, led by Redwood, of employing a series of predatory tactics that forced Byju’s to take this course of action. Should the disqualification of the Redwood entities be successful, it would prevent them from exercising critical rights associated with the TLB.
This development comes just a day after a reported deadline for Byju’s to make a $40 million quarterly interest payment on the $1.2 billion loan. However, given the ongoing legal proceedings in both Delaware and New York, the entire TLB is now under dispute. Byju’s firmly asserted that it is unable and unwilling to make any further payments to the TLB lenders, including interest, until the court reaches a decision on the matter.
Byju’s further explained that in early March, the TLB lenders unjustly accelerated the loan due to alleged non-monetary and technical defaults. This acceleration led to the lenders taking unwarranted enforcement actions, such as seizing control of Byju’s Alpha and appointing their own management. Byju’s revealed that an attempt by the lenders to take the startup to a Delaware court was unsuccessful, as the court rejected their efforts to deny Byju’s its contractual right to disqualify lenders involved in opportunistic trades.
Despite these setbacks, the TLB lenders persisted in their high-handed behavior. They issued a notice demanding immediate payment of the entire loan amount, despite being aware that the acceleration was under dispute in court, Byju’s disclosed. The company, which has recently faced numerous challenges, reiterated that its financial health remains robust. Byju’s expressed willingness to continue making payments under the TLB if the lenders withdraw their misguided actions and honor the terms of the agreement.
Executives at Byju’s commended the company for taking a courageous stance, earning appreciation from its investors. One top executive, speaking anonymously, emphasized the significance of standing up against unfair treatment and the detrimental impact it had not only on Byju’s but also on the broader Indian startup ecosystem. The executive acknowledged that dispute resolution is preferable and conveyed the company’s commitment to working toward a resolution.
|Lawsuit Filed||Byju’s has filed a lawsuit in the New York Supreme Court to challenge the acceleration of the $1.2 billion term loan B (TLB) and disqualify lender Redwood.|
|Allegations Against Redwood||Byju’s alleges that Redwood, mainly engaged in distressed debt trading, purchased a significant portion of the loan to make excessive profits.|