Delaware Court rejects TLB lenders' request to investigate BYJU'S $500 million transfer

Delaware Court rejects TLB lenders' request to investigate BYJU'S USD 500 million transfer

A Delaware court has rejected a request by edtech major BYJU'S Term Loan B lenders to investigate into USD 500 million transfer from its US-based subsidiary BYJU'S Alpha to other entities, according to details shared by sources.

BYJU'S had denied allegations levelled by its USD 1.2 billion Term Loan B lenders, saying it has never defaulted on the payments.

"Rejecting the lenders' application for information in relation to the USD 500 million (part of the funds received by BYJU'S Alpha), the Vice Chancellor remarked that lenders had "no basis to further investigate the transfer," the sources said.

In doing so, the Vice Chancellor has put a stop to the lenders' unwarranted fishing expedition and attempted to introduce a non-issue into the proceedings, which is limited to determining the control of BYJU'S Alpha," a source said.

TLB Lenders, through their agent, GLAS Trust Company, have filed suit against BYJU'S US-based subsidiary for moving out USD 500 million from BYJU'S Alpha and on other issues around TLB — a loan which is issued by institutional investors.

The order copy of Judge Morgan Zurn shared by a source said: "Plaintiff may rely on Ravindran's reaction as evidence that he perceived an Event of Default has occurred, and for other admissible purposes, but Plaintiff has no basis to further investigate the transfer itself in this action".

The rejection of the lenders' request brings a sigh of relief for BYJU'S, which has been trying to assuage investors over issues around its financial performance.

BYJU'S has filed suit in the New York Supreme Court to challenge the acceleration of the USD 1.2 billion Term Loan B and to disqualify lender Redwood and thereafter stopped making payments that were due for the loan.

In a statement in the first week of June, BYJU'S alleged that Redwood consistently increased its exposure by acquiring a sizable stake in the TLB with the intent of making windfall gains.

BYJU'S had said that the TLB lenders made an unsuccessful attempt in the Delaware proceedings 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 company said.

BYJU'S alleged that the TLB lenders' agent has even refused to provide identities of the TLB lenders to BYJU'S, which it is entitled to under the TLB, and the lenders have consistently taken measures to smear BYJU’S reputation.

The edtech major said that it was left with no option but to commence proceedings in New York – the contractually agreed forum – challenging the acceleration. Along with this, BYJU'S has also issued a notice to the Redwood entities disqualifying them.

Once such disqualification takes effect, Redwood would be restrained from exercising critical rights under the TLB, according to the company.

Email sent to BYJU'S and GLAS Trust elicited no reply.