US Lenders Say Delaware SC Ruling Affirms BYJU'S Default on TLB; No Impact on India Case, Asserts Edtech

US lenders on Tuesday said that the Delaware Supreme Court ruling has affirmed that BYJU's defaulted on Term Loan B while the edtech firm asserted that it has no impact on legal proceedings going on in India.

BYJU'S US-based lenders on Tuesday said the Delaware Supreme Court (SC) in its September 23 order affirmed the previous ruling by the Delaware Court of Chancery and said an event of default had occurred under the credit agreement and entitled BYJU's lenders and their administrative agent, GLAS Trust, for action against the company.

Think and Learn, which owns BYJU’S brand, said the Delaware SC has merely upheld 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 issue of the validity of the acceleration and subsequent enforcement actions taken by GLAS under the Credit Agreement is still pending adjudication before the New York Supreme Court, the edtech firm said.

BYJU's had raised $1.2 billion Term Loan B (TLB) -- a loan which is issued by institutional investors -- from US-based lenders through its holding company BYJU'S Alpha.

The lenders through their administrative agent GLAS Trust approached the Delaware Court of Chancery, alleging default in the payments under the loan agreement, and sought early payment of the $1.2 billion TLB.

BYJU's had contested the claim made by the US lenders.

According to a statement of the steering committee of the ad hoc group of term loan lenders, BYJU'S founder and CEO Byju Raveendran and his brother Riju Ravindran voluntarily conceded that BYJU's was in default of credit agreement by October 2022.

"We are gratified that the Delaware Supreme Court decisively affirmed what we have known all along: BYJU's breached and defaulted on the credit agreement it knowingly and willingly entered into.

"Most notably, this ruling confirms that BYJU's was in default, which both Byju and Riju personally acknowledged when they signed multiple amendments to the credit agreement on BYJU's behalf from October 2022 to January 2023," the committee said.

When contacted, BYJU’S said, “The recent conclusion reached by a Delaware court has no bearing on the ongoing legal proceedings in India” and its contractual right to disqualify certain aggressive lenders who deal in distressed debt remains intact.

“In fact, the Delaware Chancery Court had expressly declined to entertain GLAS' request to determine this issue in May 2023. Disqualification rights are crucial protections for borrowers like BYJU'S. Currently, the disqualification of lenders holding over 60 per cent of the TLB remains in effect, with no court decision to the contrary,” BYJU’S said.

The US-based lenders through GLAS Trust had filed claims of $1.35 billion dues in Indian courts during ongoing insolvency proceedings against the edtech firm. In the latest statement, the lenders have raised their total claim to $1.5 billion.

The committee said that the Delaware Supreme Court ruling has validated that the lenders were well within their contractual rights to accelerate the Term Loan and take control of BYJU's Alpha Inc.

The committee said that Byju has 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 including disclosing what happened to the $533 million of missing loan proceeds.

"It is his unreliable word against that of the highest court in the State of Delaware. There can be no other interpretation of today's clear and absolute win except that the Lenders have acted appropriately at all times, and Byju's statements otherwise should be seen exactly for what they are: lies," the lenders' committee said.

The committee said that the Delaware SC determined that the series of amendments to the credit agreement entered into between October 2022 and January 2023 make clear that BYJU's voluntarily conceded both that events of default occurred and the consequences thereof, namely, GLAS' legal entitlement to exercise remedies.

BYJU’S said that the original debt was due for repayment by November 2026 and it has already paid approximately $140 million in interest on the TLB before the lenders represented by GLAS Trust incorrectly attempted to accelerate the payment schedule without court approval.

"The Delaware Supreme Court ruling has no bearing on either the loan acceleration validity, or whether the lenders represented by GLAS are qualified lenders. Consequently, GLAS holds no legal standing in the US or locus standi in the ongoing litigation before Indian courts," the edtech firm said.