Edtech major Byju’s sued by an agent connected to its $1.2 billion loan

Byju’s Alpha company has been sued by an agent for the lenders owed $1.2 billion after months of negotiations between the creditors and the education technology company, according to bloomberg a report.

The suit was brought by Glass Trust Company and investor Timothy R. Paul v. Alpha Corporation, Tangible Play, and Riju Ravindran. The two companies being sued are units of Think and Learn Private, the education technology giant founded by Byju Raveendran. The case is Glas Trust Company vs Riju Ravindran, 2023-0488, Delaware Chancery Court (Wilmington).

Riju Ravindran is the director of Think and Learn Private Limited, according to a regulatory filing.

Tangible Play Inc. , is the company behind the Osmo brand. In 2019, US-based educational toy company Osmo was bought by Byju’s for $120 million in a stock and cash deal.

According to the Bloomberg report, “Details about why the case was brought and what the Glass Trust and Pohl wanted were omitted from the court documents.” “One memo indicates that the lawsuit may be related to a dispute over the election of directors, but it does not include any specific allegations.”

A judge in Wilmington, Delaware – where the lawsuit was filed earlier this month – scheduled a hearing by phone Thursday to decide whether the case should be expedited. The report stated that Delaware District Court Judge Morgan Zorn denied Ravindran and Biju’s request to close Thursday’s hearing to the public.

An inquiry to the company remained unanswered at the time of publication.

Earlier this year, Byju reportedly sought more time from lenders to renegotiate an agreement governing a $1.2 billion loan that is in breach of covenants, according to people familiar with the matter. The lenders also opposed the company’s proposal to rewrite its debt by increasing the interest rate on the $1.2 billion term loan due in 2026.

Last December, a group of Byju creditors asked the education tech giant to liquidate its assets in the US worth around $500-800 million to pay back part of a $1.2 billion loan if the company could not come up with the money from cash reserves. , according to informed sources. If Byju cannot repay or is unable to liquidate US assets, the creditors have said they can take legal action, people familiar with the matter said. The lenders have hired Houlihan Lokey, a global investment bank focused on mergers and acquisitions, to advise them on adjusting covenants after Byju’s alleged terms, according to the sources.

The lawsuit came as Byju closed 2,000 crore ($250 million) from Davidson Kempner Capital Management, a US-based investment firm, in a structured instruments deal, according to people familiar with the matter. This is part of an ongoing $1 billion financing the Bengaluru-based company is raising a mix of equity and structured instruments at its current valuation of $22 billion.

The new funding round is expected to help Byju meet its financing needs amid a financing winter and pay part of the $1.2 billion B term loan the company raised in 2021.

The company is also planning an Initial Public Offering (IPO) of Rs 8,000 crore for its subsidiary Aakash, as per sources. Byju’s to acquire Aakash for $1 billion in 2021.

The lawsuit also came as the Enforcement Directorate (ED) recently conducted searches and seizures at three Byju headquarters under the Foreign Exchange Management Act (FEMA).

The searches also revealed that the company received foreign direct investment allegedly around Rs. 28,000 crore between 2011 and 2023. Byju has made a number of overseas acquisitions (it has invested around Rs. 9,000 crore) over the years as part of its growth. strategy.

Byju’s has raised $5.8 billion in total from investors such as the Qatar Investment Authority (QIA), Sumeru Ventures, Vitruvian Partners, BlackRock, Chan Zuckerberg Initiative, Sequoia, Silver Lake, Bond Capital, Tencent, General Atlantic and Tiger Global. The company has more than 150 million learners.

US-based asset management firm BlackRock has cut Byju’s valuation by nearly 50 percent, to $11.5 billion. This is a sharp decrease from the $22 billion that the Bengaluru-based edtech decathlon was last assessed in 2022. Byju posted losses of Rs 4,588 crore in FY21, 19 times more than the previous year, according to the latest available financial report. Byju, valued at $22 billion, had aimed to be profitable by March of this year.

(With inputs from Bloomberg)