With this judgment by the Delaware Supreme Court, lenders can claim full repayment and take control of the subsidiary, the US entity of Byju’s Alpha Inc
In another setback for Byju’s, the Delaware Supreme Court of the USA has backed the lenders of the ed-tech company. Thus, the court highlighted that the lenders represented by Glas Trust LLC has the right to take control of the US entity of Byju’s Alpha Inc.
This is because the ed tech firm failed to repay a $1.2 billion loan to the lenders. This was first reported by Bloomberg Law. While rejecting the plea of Byju's, the court ruled, “We find it difficult to see how judicial economy and finality can square with requiring the parties to retry the case, merely because the appellants failed to address an issue which they now claim is vital to this case.”
This is because 100 per cent of the company’s equity was kept as collateral while taking the loan. In more than 17 months after taking the loan, the ed-tech firm did not make any contractual payment, as per the US lenders.
Following this ruling, in a statement, the lenders' steering committee reportedly mentioned, “This ruling confirms that Byju’s was in default, which both Byju Raveendran (founder) and Riju Ravindran personally acknowledged when they signed multiple amendments to the credit agreement on Byju’s behalf from October 2022 to January 2023.”
In a previous statement to the ed-tech firm, lenders of the company highlighted that Byju’s was obligated to repay $1.2 billion with interest to the lenders. The steering committee of the ad hoc group mentioned that neither Byju Raveendran (founder of the company), nor the Insolvency Resolution Professional (IRP) have the power to disqualify any term loan lender. The lenders further highlighted that even if such an authority does exist, the edtech firm would still need to pay the full amount.
The lenders also reportedly highlighted that the “ed-tech firm attempted to concoct an alternate narrative that Byju’s did not default and to place the blame of the company’s failure on others rather than repay lenders money that is rightfully owed to us, including disclosing what happened to the $533 million of missing loan proceeds.”
Amid the ongoing financial struggle in the company, Raveendran recently mentioned that he managed to borrow funds to pay salaries to teachers. While apologising to teachers for the delay of the salary, in an email sent to teachers, he highlighted that they would get a small portion of their salary on the weekend.
“As a small token of appreciation, I have managed, against all odds, to borrow some funds. It won’t be much, but each one of you will receive a small payment by this weekend," Raveendran reportedly said in a statement.