Byju’s files suit in US to disqualify lender Redwood over alleged ‘predatory tactics’

Edtech firm Byju’s on Tuesday said that it has filed a complaint with the New York Supreme Court to challenge acceleration of the $1.2 billion Term Loan B (TLB) and to disqualify lender Redwood for its predatory practice.

Byju’s alleged that Redwood purchased a significant portion of the loan while primarily trading in distressed debt. On  March 3, 2023, the TLB lenders unlawfully accelerated the TLB on account of certain alleged non-monetary and technical defaults, the company said in a statement.

Byju’s has also decided to stop repayment of its TLB, including the $40 million interest payment that it was expected to pay on Monday.

According to the Bengaluru-based company, the TLB lenders undertook unwarranted enforcement measures including seizing control of BYJU’S Alpha and appointing its own management. Not resting content with this, the TLB lenders (acting through their agent, GLAS Trust Company) commenced litigation in Delaware in an attempt to lend credence to these actions.

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

The Delaware court rejected this attempt, ruling that the TLB lenders “have not demonstrated either irreparable harm or the balance of the harms as required to support a provision restraining” this contractual right of Byju’s, the edtech company said.

Redwood is yet to comment on the development.

It’s worth noting that Byju’s has been exploring the market for a larger round for quite some time and only managed to raise $250 million via structured credit transaction from US-based alternative investment firm Davidson Kempner Capital Management.

​​The country’s largest valued private company faced back-to-back valuation markdowns with BlackRock cutting Byju’s valuation to $8.2 billion. It was more than 60% lower than the $22 billion valuation at which it raised equity funding in October 2022.

Byju’s was also in the news for not disclosing its audited financial results for the last two fiscal years. The Enforcement Directorate (ED) also conducted searches under FEMA at three premises related to the company in April this year.

Amid all the chaos, the company announced that it will launch the Initial Public Offering (IPO) of its subsidiary, Aakash Education Services Limited (AESL), mid next year.