The Delaware Supreme Court has upheld a ruling that Byju’s defaulted on its $1.2 billion term loan B (TLB), allowing lenders to take control of Byju’s Alpha Inc, the company’s American subsidiary.
The loss is a setback for Byju’s as it closes its options of monetising platforms like Epic and Great Learning, which are part of the US subsidiary, which it was looking to sell to raise funds.
For instance, Byju’s has been looking to sell Epic, a digital reading platform for children under 12, and Great Learning, which focuses on higher education and professional certification programmes, to raise around $800 million to $1 billion.
The court, on Monday, rejected Byju’s appeal against the earlier Delaware Court of Chancery ruling, which had determined that the lenders, represented by Glas Trust LLC, were within their rights to enforce the loan agreement. The apex Delaware court emphasised that Byju’s had forfeited its right to argue certain issues by not raising them earlier in the case.
The court stated, “The amendments were contracts extensively negotiated by sophisticated, well-counseled parties and the several rounds of amendments demonstrate an obvious, deliberate effort by the parties to address this specific issue. Accordingly, the parties are bound by the terms of the credit agreement”.
The lenders, represented by Glas Trust, said, “We are pleased the Delaware Supreme Court affirmed what we’ve known: Byju’s knowingly breached the credit agreement and defaulted. Both Byju Raveendran and Riju acknowledged this when signing the amendments between October 2022 and January 2023. The ruling confirms our right to accelerate the loan and take control of Byju’s Alpha Inc”.
Byju’s contested the ruling’s implications, stating it “has no bearing on the ongoing legal proceedings in India” and only upholds “a limited ruling by the Chancery court on the validity of one of their nominees as the director of the shell company, Byju’s Alpha Inc”. The company maintained that loan acceleration and enforcement actions by GLAS are still pending before the New York Supreme Court.
Byju’s Alpha Inc, a subsidiary incorporated in 2021, was created specifically to spearhead the company’s expansion in North America. The subsidiary had availed a $1.2 billion TLB in November 2021, a form of leveraged loan typically issued to non-investment-grade companies. The loan came with a caveat that the funds couldn’t be used for operations in India.
From: financialexpress
Financial News
