Byju’s had been working to sell assets and deal with the loan issue
Lenders to Byju’s, once one of India’s hottest tech startups, officially declared a default on a $1.2 billion loan and took control of a unit of the education-technology provider, as per a Delaware judge’s ruling.
The lenders, including Redwood Investments LLC and Silver Point Capital LP, were within their contractual rights to replace a relative of company founder Byju Raveendran on the board of Byju’s Alpha, a special-purpose company formed for financing purposes, with their nominee, Delaware Chancery Court Judge Morgan Zurn ruled.
Zurn rejected a complaint by Byju’s that Timothy Pohl, appointed by lenders to oversee the special-purpose entity, was improperly authorized to take the reins. Pohl was “effectively seated” as the sole director of Byju’s Alpha due to the defaults, the judge said in a 41-page ruling.
Lenders have been pressing for the repayment of the $1.2 billion loan amid the company’s growing distress after a pandemic-era surge in online learning subsided. Byju’s had been trying to sell assets and address the loan issue when government investigators searched company offices this year. The lender dispute has also led some investors to devalue their stakes in one of the world’s largest ed-tech companies.
A lawyer for the lenders stated earlier this year that Byju’s Alpha was meant to serve as a holding company to protect their rights in the case. The lenders weren’t seeking to take over the entire ed-tech company, Brock Czeschin, a lawyer for Red Tree and Silver Lake, said in a May court hearing.
Bengaluru, India-based Byju’s didn’t immediately respond to a request for comment. The closely held company had said the lenders’ default arguments are baseless.
“We are pleased the Delaware Chancery Court agrees that Byju’s has repeatedly defaulted on its loan obligations,” a spokesperson for the lender group said in a statement. “The lenders reserve all rights available to them.”
The loan terms allowed lenders to take control of pledged Bjyu’s Alpha shares if a default triggered that right, Zurn said in her Nov. 2 ruling. When a company unit failed to get the Indian government’s backing as a loan guarantor, the lenders filed a notice of default in March, according to a transcript of the judge’s announcement of her decision.
Pohl removed all of the company’s officers and took over as CEO after he was was appointed as sole director of Byju’s Alpha, according to the transcript. The suit over the loan was filed by Glas Trust Co., which serves as trustee for the lenders. The trust turned to Pohl to oversee Byju’s Alpha on behalf of the creditors.
Byju’s complained that the ex-lawyer, who received at least $375,000 for his role as the firm’s supreme leader, was receiving excessive fees. Zurn rejected that argument, saying Pohl’s $75,000-per-month pay was authorized by a “status-quo” order she entered in the case to protect Byju’s Alpha.
The case is Glas Trust Company v. Ravindran, 2023-0488, Delaware Chancery Court (Wilmington).
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
Waiting for response to load…
