Byju's Files Suit Challenging Loan Acceleration; Says Won't Make Payments Until Resolution

Byju's has filed a complaint in the New York Supreme Court to "challenge the acceleration" of the $1.2 billion term loan and to disqualify Redwood, an agent of the lenders, who it says, has indulged in a series of "predatory tactics."

In a statement on Tuesday, the Bengaluru-headquartered edtech firm said the lenders unlawfully accelerated the loan on account of "certain alleged non-monetary and technical defaults."

"On March 3, the lenders undertook unwarranted enforcement measures, including seizing control of Byju's Alpha and appointing its own management. Not resting content with this, the lenders (acting through their agent, Glas Trust Company) commenced litigation in Delaware in an attempt to lend credence to these actions."

Byju’s has said it will not be making any further payments in the term loan as legal proceedings are now ongoing in both Delaware and New York. “Byju’s cannot be expected to and has elected not to make any further payment to the lenders, including any interest, until the dispute is decided by the court.”

It added that it is willing to continue making payments under the term loan if the lenders withdraw their ill-conceived actions and honour the terms of the agreement. 

In the Delaware proceedings, Byju’s said the lenders unsuccessfully attempted to deprive it of its contractual right to disqualify lenders engaged primarily in opportunistic trades. 

“Despite this, the lenders continued to conduct themselves in a high-handed manner. They issued a notice demanding immediate payment of the entire amount…despite knowing that this purported acceleration was under challenge before the court,” Byju’s said.

Byju’s said that Redwood is being sued for consistently increasing its exposure by acquiring a sizable stake in the term loan with the intent of making windfall gains.

“In the wake of all these actions, Byju’s was left with no option but to commence proceedings in New York – the contractually agreed forum – challenging the acceleration. Along with this, Byju’s has 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 term loan B,” it added.

“The company's robust financial health, highlighted by recent successful fundraising efforts, ensures that this disagreement with the lenders does not pose any significant impact on its operations,” it added.

The statement by Byju's comes a day after Bloomberg reported that it faced a deadline day on June 5 to make a quarterly interest payment of $40 million on the term loan.