Edtech major BYJU’S has filed a complaint in the New York Supreme Court to challenge the acceleration of the $1.2 billion Term Loan B (TLB) and to disqualify Redwood, which, contrary to the terms of the TLB, purchased a significant portion of the loan while primarily trading in distressed debt.
The company has had to take these measures following a series of predatory tactics by the lenders, led by Redwood, BYJU’S said in a release.
On March 3, 2023, the online learning platform claimed that TLB lenders unlawfully accelerated the TLB on account of certain alleged non-monetary and technical defaults.
On the back of this unconscionable acceleration of the TLB, the TLB lenders undertook unwarranted enforcement measures, including seizing control of BYJU’S Alpha and appointing its own management, BYJU’S said.
Not content with this, the TLB lenders (acting through their agent GLAS Trust Company) commenced litigation in Delaware in an attempt to lend credence to these actions.
Furthermore, in the Delaware proceedings, the TLB lenders (unsuccessfully) attempted to deprive BYJU’S of its contractual right to ‘disqualify’ lenders engaged primarily in opportunistic trades, the company added.
The Delaware court rejected this attempt, ruling that the TLB lenders “have not demonstrated either irreparable harm or the balance of the harms as required to support a provision restraining” this contractual right of BYJU’S.
Despite this, the TLB lenders continued to conduct themselves in a high-handed manner. They issued a notice demanding immediate payment of the entire amount under the TLB, despite knowing that this purported acceleration was under challenge before the court, the edtech start-up said.
Identity refusal
The TLB lenders’ agent even refused to provide the identities of the TLB lenders to BYJU’S — something BYJU’S is entitled to under the TLB. Additionally, the TLB lenders have consistently taken measures to smear BYJU’S reputation.
At the same time, Redwood, a lender known to primarily trade in distressed debt, consistently increased its exposure by acquiring a sizeable stake in the TLB with the intent of making windfall gains.
Along with this, BYJU’S also issued a notice to the Redwood entities disqualifying them. Once such disqualification takes effect, Redwood would be restrained from exercising critical rights under the TLB.
Given that legal proceedings are now underway in both Delaware and New York, it is clear that the entire TLB is disputed. As such, BYJU’S cannot be expected to and has elected not to make any further payment to the TLB lenders, including any interest, until the dispute is decided by the court, the company noted.
BYJU’S claims to remain financially robust with significant cash reserves remains open to discussions with the TLB lenders and is ready, willing, and able to continue making payments under the TLB if the lenders withdraw their ill-conceived actions and honour the terms of the agreement.