US Delaware Supreme Court rules Byju’s defaulted on $1.2-billion loan

In yet another setback for Byju’s, the Delaware Supreme Court upheld a ruling that found the edtech company in default on its $1.2-billion Term Loan B thus entitling lenders to ‘exercise remedies’.

The ruling allows lenders to take control of the company’s assets in the US, primarily Byju’s Alpha Inc, and demand full repayment. Lenders have appointed Timothy Pohl as the sole director of Byju’s Alpha Inc for the purpose.

The Court noted that Byju’s had ample opportunities to address its concerns before the Court of Chancery, but failed to do so.

“We are gratified the Delaware Supreme Court decisively affirmed what we have known all along: Byju’s breached and defaulted on the credit agreement it knowingly and willingly entered into. Most notably, this ruling confirms that Byju’s was in default, which both Byju and Riju personally acknowledged when they signed multiple amendments to the credit agreement on Byju’s behalf from October 2022 to January 2023. As such, and as validated by the Delaware Supreme Court, the lenders were well within their contractual rights to accelerate the term loan and take control of Byju’s Alpha Inc,” said the lenders in a statement.

With the Delaware Supreme Court ruling, the control of Byju’s Alpha Inc remains in the hands of Glas Trust and its client lenders. The lenders expressed satisfaction with the outcome that strengthened their stance on Byju’s default.

“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. There can be no other interpretation of today’s clear and absolute win except that the lenders have acted appropriately at all times, and Byju’s statements otherwise should be seen exactly for what they are: lies.”

Insolvency case

Glas Trust, which has sued Byju’s for the recovery of $1.2-billion loan in US as well as in India, was recently removed from the Committee of Creditors in the ongoing insolvency case against Byju’s. This decision was made by the Insolvency Resolution Professional (IRP) Pankaj Srivastava, after determining that Glas Trust no longer meets the requirement of representing at least 51 per cent of the lenders.

Meanwhile, Byju’s responded that the 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,” said Byju’s in its statement.