Byju’s sues ‘predatory’ lenders on $1.2B term loan, won’t make further payments

Indian edtech giant Byju’s has filed a complaint in the New York Supreme Court to challenge the acceleration of the $1.2 billion term loan B, calling their demands for prepayment of the entire amount “high-handed,” and sought to disqualify investment management firm Redwood, who it alleges has conducted a series of predatory tactics.

The Bengaluru-headquartered startup said that Redwood purchased a significant portfolio of the loan while primarily trading in distressed debt “with the intent of making windfall gains.” Byju’s took the loan in late 2021 as it sought financing options to fund its fast-growth without diluting existing shareholders’ equity stake in the firm.

India’s most valuable startup said it will not make any payments or interest to the term loan B lenders until the dispute is resolved.

The move from the Indian giant follows lenders “unlawfully” accelerating the term of the loans on the account of “certain alleged non-monetary and technical defaults,” Byju’s claimed on Tuesday.

“On the back of this unconscionable acceleration of the TLB, 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,” Byju’s said Tuesday.

“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.”

Byju’s said it had no choice but to take legal action. The company has also issued a notice to the Redwood entities, seeking their disqualification.

“Once such disqualification takes effect, Redwood would be restrained from exercising critical rights under the TLB. It is important to note that Byju’s had so far demonstrated remarkable restraint by refraining from utilising the disqualification clause, instead striving for months to achieve an amicable resolution with the hawkish trader-lender,” Byju’s said in a statement.