An ad-hoc group of Byju’s term loan lenders on Wednesday said it has filed to initiate bankruptcy proceedings against three units of the edtech firm in the US.
“We have taken this action to protect and preserve the value of [Byju’s units] Epic, Neuron Fuel, and Tangible Play,” the lender group said in a statement. “We remain committed to their success and stand ready to infuse the capital necessary to reorganise the businesses.”
The lenders have been negotiating with the Indian edtech firm for the prepayment of a $1.2 billion term loan secured in 2021. The company had set up a subsidiary in the US, Byju’s Alpha, to receive the loan proceeds.
Once considered the poster child of edtech in India with a peak valuation of about $22 billion, the Indian edtech company has been under scrutiny for a host of issues. This has led to its shareholders pushing for significant changes, including the ouster of founder Byju Raveendran. Compounding the turmoil, the company has witnessed the resignation of its auditor, Deloitte, and several board members.
“Since Byju’s began to default on its Term Loan obligations shortly after we provided Byju’s Alpha with financing in 2021, we have made every effort possible to work productively and collaboratively to help Byju’s cure its multiple defaults. However, Byju’s management has no intention or ability to honour its obligations under the Term Loans,” the lenders said on Wednesday.
Last month, the US Bankruptcy Court of Delaware found Riju Ravindran, brother of Byju Raveendran and one of the three directors at Byju’s, to be in contempt of court. This ruling follows Ravindran’s refusal to disclose the location of $533 million in term loan proceeds transferred from BYJU’S Alpha.
“Indeed, Byju’s founders, who also serve as the three directors of the overall enterprise—Byju Raveendran, Riju Ravindran, and Divya Gokulnath—unlawfully diverted $533 million in loan proceeds, the whereabouts of which is still unknown,” the lenders said.
In February, Byju’s Alpha filed for Chapter 11 bankruptcy proceedings in the US Court of Delaware, listing its liabilities as $1 billion to $10 billion.
“Due to Byju’s failed leadership and mismanagement, significant harm has been done to Byju’s businesses and the value of the Company’s assets. Shareholders and lenders to the Company have seen the value of their investment deteriorate, employees and vendors have not been paid in a timely manner, and customers have suffered,” the lender group said on Wednesday.
A few of Byju’s investors, including Prosus NV, General Atlantic, Sofina, and Peak XV Partners, with support from Tiger Global and Owl Ventures, recently moved the National Company Law Tribunal (NCLT) against a recent $200-million rights issue at a 99% discount to its peak valuation of $22 billion.
