BYJU'S term loan lenders initiate bankruptcy proceedings against US assets
Term-loan lenders of BYJU'S Alpha Inc and Glas Trust Company have initiated involuntary Chapter 11 bankruptcy proceedings against three US-based guarantors - Epic Creations Inc, Neuron Fuel Inc, and Tangible Play Inc. The announcement was made in a statement on Wednesday. Glas Trust, a non-banking loan agency based in the US, has been appointed by over 100 lenders as an administrative agent for the $1.2-billion term loan.
BYJU'S accused of defaulting on loan obligations
The lenders claim that BYJU'S began defaulting on its term loan obligations shortly after receiving financing in 2021. Despite attempts to rectify the multiple defaults, the company's management allegedly showed no intention or ability to fulfill its obligations. The founders of BYJU'S - Byju Raveendran, Riju Ravindran and Divya Gokulnath - are accused of unlawfully diverting $533 million in loan proceeds, whose location remains unknown.
BYJU'S planned sale of businesses amid financial crisis
In September, reports emerged that BYJU'S was considering selling two of its businesses - reading platform Epic and higher-education platform Great Learning - to repay its term loan B lenders. These companies were part of BYJU'S $22 billion empire expansion, acquired during the 2021 funding rush. However, by November 2021, the company had raised $1.2 billion through a term loan B from overseas investors when interest rates were low.
Lenders allege mismanagement and harm to BYJU'S businesses
The lenders have accused BYJU'S of failed leadership and mismanagement, causing significant harm to its businesses and asset value. They claim that shareholders and lenders have seen their investments deteriorate, employees and vendors have not been paid on time, and customers have suffered. The lenders are now taking action to preserve the value of these assets, expressing their commitment to their success and readiness to infuse necessary capital for reorganization.
Lenders hope for court supervision to maximize asset value
The lenders hope that under court supervision, the three guarantors - Epic, Neuron Fuel, and Tangible Play - will benefit from oversight while a plan is developed to maximize the value of these assets for all stakeholders. This move comes after BYJU'S missed an interest payment in June 2023 and took its lenders to court to prevent an acceleration of the repayment. The relationship between BYJU'S and its lenders has since deteriorated, with interest rates surging.
