Byju's Faces US Bankruptcy Proceedings Over $1.2 Billion Term Loan Subsidiaries: Report

A group of lenders in the USA have approached a US court to impose bankruptcy oversight on the subsidiaries of embattled edtech platform Byju’s. The subsidiaries against which the creditors, led by HPS Investment Partners, filed the petition are Neuron Fuel Inc., Epic! Creations Inc., and Tangible Play Inc. This was first reported by Bloomberg.

Neuron Fuel Inc., Epic! Creations Inc., and Tangible Play Inc. were all once associated with Byju’s Alpha. The lenders have been negotiating with the edtech company about the early repayment of a term loan that was taken by Byju's Alpha, a subsidiary of the edtech firm. While engaging in a separate legal dispute over the loan in American courts, these lenders are also seeking court-supervised restructuring of three subsidiaries under Chapter 11 of the US Bankruptcy Code. 

This year, Alpha defaulted on $1.2 billion in debt and filed for bankruptcy after the same. Epic, Tynker, and Osmo, which Byju's acquired in 2021 before taking the loan, acted as guarantors for the syndicated term loan from various institutions, known as term loan B. 

By refusing to give financial details of the three units, Byju’s founder, Byju Raveendran, has been accused of violating the debt contracts with the lenders. The lenders in the court, as per Moneycontrol, said, “So the petitioning creditors undertook their own investigation, and what they learned is frightening: the alleged debtors are in financial distress and money is being siphoned out of them.”

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The lenders also said, “Since Byju’s began to default on its term loan obligations shortly after we provided Byju’s Alpha (the US subsidiary of Byju’s) with financing in 2021, we have made every effort possible to work productively and collaboratively to help Byju’s cure its multiple defaults.” 

While highlighting that these actions have been taken to protect and preserve the value of Epic, Neuron Fuel, and Tangible Play, the lender group highlighted that the aim of the petition is to prevent corporate mismanagement. The lenders further highlighted that the petition has been filed to safeguard and maximize the value of Byju's US-based operational entities for the benefit of all stakeholders and stop more asset diversions.