Overseas lenders file insolvency proceedings against Byju’s in India

The Bengaluru-based edtech company and lenders have been in a protracted dispute over the use of funds.

Foreign lenders, who collectively extended more than 85 percent of Byju’s $1.2 billion term loan, have filed an insolvency petition against the online tutor in India, people directly aware of the development said.

The bankruptcy petition was filed earlier this week in the Bengaluru bench of the National Company Law Tribunal ( NCLT), the people said, requesting anonymity.

Any proceedings by lenders before the NCLT are premature and baseless, Byju’s said. “As we have stated before, the validity of lenders’ actions, including acceleration of the term loan, is pending and under challenge in several proceedings, including before the New York Supreme Court,” the Bengaluru-based edtech company said in response to a query on January 25. It also highlighted that the timing of the lenders’ proceedings coincides with the commencement of a rights issue by the company.

In July, Byju’s reached an agreement with the steering committee of the lenders to amend the loan’s terms, including the pricing and tenure, by August 3, 2023.

The lenders have hired a leading law firm to pursue bankruptcy claims and have served notices to the edtech company. Email queries sent to a spokesperson for the committee of lenders remained unanswered.

The edtech company and lenders have been in a protracted dispute over the use of funds. The disagreements arose soon after Byju’s secured the  $1.2 billion term loan facility (TLB) from the lenders in November 2021. A TLB is a senior secured syndicated credit facility issued by global institutional investors. Typically, the proceeds from a TLB are used to either refinance an existing debt or make overseas acquisitions to enhance a company’s offerings.

Byju’s said that the initiation of the legal process does not reflect on its financial strength or its ability to meet payment obligations. “We firmly maintain that we are a resilient, viable entity that is incrementally charting a path towards sustainable growth,” the company said in the statement.

In September, Byju’s said it invested the money raised through TLB in “high-grade fixed income assets,” countering allegations of concealing the money from lenders by putting it in an “obscure hedge fund”.

“Byju’s would like to emphasize that its Credit Agreement with the lenders does not prohibit or restrict the usage, movement or investment of funds disbursed thereunder,” the company said in the statement.”...An offshore subsidiary remains the beneficiary of the money invested in high security fixed income instruments invested with a multi-hundred billion dollar fund in the US,” it added.

Byju’s also denied media reports suggesting it was no longer the beneficial owner of funds and has initiated legal action in the New York Supreme Court, accusing lenders of predatory tactics.