BYJU’S, the Indian edtech decacorn, has taken a significant step by filing a complaint against the acceleration of the $1.2 billion Term Loan B (TLB) and seeking to disqualify Redwood as a lender. The company alleges that Redwood, which primarily deals in distressed debt, has engaged in predatory tactics against BYJU’S after acquiring a substantial portion of the TLB.
According to BYJU’S, Redwood’s actions, including increasing its exposure to the TLB with the intention of making windfall gains, left the company with no choice but to challenge the acceleration in New York, the agreed forum for such disputes. The edtech giant has also issued a notice to Redwood, disqualifying them and restraining them from exercising critical rights under the TLB.
As a result of the ongoing legal proceedings, BYJU’S has decided to stop making any further payments to the TLB lenders until the dispute is resolved. The company asserts that it remains financially robust with significant cash reserves and is open to discussions with the lenders if they withdraw their actions and honor the terms of the agreement.
BYJU’S highlights its confidence by mentioning its recent raise of $250 million in debt from Davidson Kempner and denying the lenders’ allegations that it was hiding $500 million from them during the Delaware proceedings.
The acceleration of the TLB occurred on March 3, citing alleged non-monetary and technical defaults. Following this, the lenders took control of BYJU’S Alpha and initiated litigation in Delaware. However, the Delaware court rejected the lenders’ attempt to deprive BYJU’S of its right to disqualify lenders.
This move by BYJU’S comes after negotiations to restructure the TLB fell apart, primarily due to the lenders’ request for an upfront payment, which BYJU’S did not agree to.
As the dispute unfolds, the Indian edtech sector closely watches the outcome, recognizing the significance of this battle between BYJU’S and Redwood, which could have far-reaching implications for the industry as a whole.