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Delaware Supreme Court holds Byju's in default of $1.5 billion loan

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ETtechLast Updated: Sep 24, 2024, 12:44:00 PM IST

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This means the lenders can demand a full repayment from the troubled edtech firm and take control of Byju's US entity, Byju's Alpha. This is the second public statement from the lenders reinforcing that Byju’s and Raveendran must repay the outstanding loan.

Illustration shows BYJU'S Owner Byju Raveendran photo on his company web page

The highest court in the US state of Delaware has upheld a ruling by a lower court that held edtech firm Byju's to be in default of a $1.5 billion loan.

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Following the decision of the Delaware Supreme Court, lenders to the edtech firm can now demand full repayment, take control of Byju’s US entity Byju’s Alpha Inc and appoint Timothy Pohl, Alpha Inc’s court-appointed CEO, as its sole director, the US lenders said.

“This ruling confirms that Byju’s was in default, which both Byju Raveendran (founder) and Riju Ravindran (brother of Byju and co-founder) personally acknowledged when they signed multiple amendments to the credit agreement on Byju’s behalf from October 2022 to January 2023,” the steering committee of the ad hoc group of term loan lenders to Byju’s Alpha Inc said in a statement.

This is the second public statement from the lenders reinforcing that Byju’s and Raveendran must repay the outstanding loan.

According to the court, the edtech company must be held accountable for its financial defaults and cannot distance itself from conceding to those defaults and their consequences, the lenders said.

“Byju has attempted to concoct an alternate narrative that Byju’s did not default and to place the blame of the company’s failure on others rather than repay lenders money that is rightfully owed to us, including disclosing what happened to the $533 million of missing loan proceeds. It is his unreliable word against that of the highest court in the state of Delaware,” they added.

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Earlier, the US lenders had said that the troubled edtech firm must repay the borrowed $1.2 billion along with interest. According to these lenders, Byju’s has not made any contractually due payment in more than 17 months.

"Byju's wants to emphasise that the recent conclusion reached by a Delaware court has no bearing on the ongoing legal proceedings in India. In any event, the Delaware Supreme Court has merely upheld a limited ruling by the Chancery court on the validity of one of their nominees as the director of the shell company, Byju's Alpha Inc," the edtech firm said in a statement.

"It is pertinent to mention that the original debt was due for repayment by November 2026. Byju's had already paid approximately $140 million in interest on the TLB before the lenders represented by Glas Trust incorrectly attempted to accelerate the payment schedule without court approval," Byju's added.

On September 17, Glas Trust, the trustee for lenders to which Byju's owes $1.2 billion, moved the Supreme Court challenging its removal from the committee of creditors (CoC) of the debt-ridden Think & Learn Pvt Ltd, the edtech firm’s parent, by the interim resolution professional (IRP). The US lender had also called for the removal of Pankaj Srivastava, the IRP of Think & Learn.

On September 3, Srivastava removed Glas Trust, noting that it did not represent the minimum 51% of lenders in the consortium that issued a $1.2 billion term loan to the company.