Byju's lawsuit meritless and an effort to avoid complying with obligations: Lenders

Byju Raveendran, founder, CEO, Byju's

A group of lenders described the case filed by Byju's against them in the New York Supreme Court as "meritless" and characterised it as an effort by the company to avoid fulfilling its obligations, further escalating tensions between the two parties that have been at loggerheads for almost six months.

“Byju's’ meritless lawsuit against its term loan lenders is simply an effort to avoid complying with its obligations, including making contractually required payments," said a group of ad hoc term loan lenders, who collectively own more than 85 percent of Byju's $1.2 billion term loan.

"The lender group, comprised of 21 highly respected global institutional investors, has sought to work constructively with the company over the past nine months to cure its numerous defaults and will continue to do so in good faith. However, in the event, Byju's intentionally remains in default, the lender group reserves all rights available to it to enforce the credit agreement,” the group added.

Houlihan Lokey serves as financial advisor to the term loan lender group and Kirkland & Ellis LLP, Cahill Gordon & Reindel LLP, and Shearman & Sterling LLP are serving as legal advisors, according to the statement.

The statement from lenders comes a couple of days after Byju's skipped paying $40 million in interest payments on the term loan it had raised in November 2021. The company instead filed a case against one of its lenders in the New York Supreme Court and also sought disqualification of the lender and called it "predatory."

Earlier in May, Byju's lenders had sued Byju's Alpha Inc, a wholly-owned US subsidiary of Byju's that raised the TLB in November 2021 in the Delaware court on allegations of hiding $500 million from them.

Byju's, however, denied the allegations and said that given that legal proceedings were on foot in both Delaware and New York, it was clear that the entire TLB stands disputed. The company, therefore said it has elected to not make any further payments to the TLB lenders, including any interest, until the dispute is decided by the court.

Byju's, one of the world's largest edtech startups, soared to new highs in March last year, when it raised a massive $800 million round at a $22 billion valuation. But since then, the company has come under fire for a number of reasons including accounting irregularities, tussle with lenders, mass layoffs, and mounting losses. Byju's has raised a $250 million round at a flat $22 billion valuation since then, and is in talks to raise $700 million more at the same valuation.

Byju's offices in Bengaluru also got searched by India's financial probe agency Enforcement Directorate (ED) in April under provisions of the Foreign Exchange Management Act (FEMA).  The company is yet to file audited results for FY22 (2021-22).

For FY21 (2020-21), Byju's reported a huge jump in losses to more than Rs 4,500 crore, while its revenue dropped marginally, but surprisingly as FY21 was the first year of Covid that gave online learning companies a shot in the arm. Founded over a decade back by former teacher Byju Raveendran, Byju’s has raised over $5 billion, most of which was raised in the past five years.