Byju’s files complaint against ‘predatory’ lenders in NY court

Byju’s app / Photo credit: Shutterstock

Indian edtech firm Byju’s has filed a complaint in the New York Supreme Court to challenge the acceleration of a US$1.2 billion loan by its lenders and to disqualify one of them, Redwood, for alleged “predatory tactics.”

On March 3, the lenders “unlawfully accelerated” the loan because of “certain alleged non-monetary and technical defaults,” according to the company. The lenders also allegedly took unwarranted enforcement measures, including seizing control of Alpha, a Byju’s subsidiary that holds some of its intellectual property rights.

Earlier this year, creditors claimed that Alpha moved US$500 million to conceal it from them, but a lawyer for the Byju’s unit said the company was current on its debt payments. The accusations against Alpha were laid out during a court hearing in Delaware in May.

Led by Redwood – a hedge fund known for trading distressed debt – the lenders also allegedly attempted to deprive Byju’s of its contractual right to disqualify lenders engaged mainly in opportunistic trades. However, the Delaware court rejected this attempt and upheld Byju’s right.

The company also said that until the dispute is resolved, it won’t make any further interest payments, including the US$40 milion interest that it previously planned to pay. Byju’s added that it remains “financially robust” and is open to discussion with the lenders.

Byju’s US$1.2 billion debt is the largest unrated loan made by a startup so far. On June 1, lenders pulled out of discussions  to restructure the loan and demanded to speed up the payment instead.

India’s Directorate of Enforcement also recently raided three Bengaluru properties linked to Byju’s, noting that the company missed filing financial statements since the financial year ended March 2021.

See also: The $22b question on Byju’s valuation