Troubled edtech major Byju’s term-loan lenders have petitioned a bankruptcy court in Delaware against the companies’ subsidiaries — Epic, Tynker, and Osmo — seeking to initiate Chapter 11 bankruptcy proceedings.

Glas Trust, a US-based non-banking loan agency, was appointed by over 100 lenders as an administrative agent for the $1.2-billion term loan.

“Since Byju’s began to default on its term-loan obligations shortly after we provided Byju’s Alpha (the US subsidiary of Byju’s) with financing in 2021, we have made every effort possible to work productively and collaboratively to help Byju’s cure its multiple defaults,” the lenders said.

“However, it is clear that Byju’s management has no intention or ability to honour its obligations. 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 are still unknown.”

Byju’s struggles

Epic and higher-education platform Great Learning are up for sale to pay its term loan B lenders. Byju’s had acquired both companies during the starting funding rush of 2021 to build its $22-billion empire.

The company had raised $1.2 billion through a term loan B from overseas investors in November 2021. However in June 2023, Byju’s skipped an interest payment and took its lenders to court to prevent an acceleration of the repayment.

“As a result of Byju’s failed leadership and mismanagement, significant harm has been done to its businesses and the value of its assets. Shareholders and lenders of the company have seen the value of their investments deteriorate, employees and vendors have not been paid in a timely manner, and customers have suffered,” the lenders said in the statement.

They added that they were taking action to preserve the value of these assets. “We remain committed to their success and are ready to infuse the capital necessary to reorganise the businesses. Under the supervision of the court, the lenders hope that Epic, Neuron Fuel and Tangible Play will benefit from much-needed oversight, while a plan is developed to maximise the value of these assets for the benefit of all stakeholders.”

The edtech major is also embroiled in legal battles with other investors, including Prosus Ventures and Peak XV, over governance, financial mismanagement. Investors are also pushing for a change of leadership and a new board of directors.

Byju’s, which was once valued at more than $22 billion, recently raised $200 million from a recent rights issue which they haven’t been able to access following a court order, even as dues to employees, lenders and vendors have increased.