BYJU’s faces insolvency proceedings in NCLT over $1.2 billion debt

Troubled edtech BYJU’s has been dragged to the National Company Law Tribunal (NCLT) by US lenders, who have filed for insolvency.

Lenders of BYJU’s Alpha approached the tribunal to recover the $1.2 billion term loan B (TLB), which the edtech had raised in November 2021 in debt from a group of overseas investors.

The edtech company termed the proceedings as “premature” and “baseless.”

“As we have stated before, the validity of lenders’ actions, including acceleration of the term loan, is pending and under challenge in several proceedings, including before the New York Supreme Court,” the company said in an elaborate statement.

Notably, a TLB is a type of senior secured syndicated credit facility that is issued by global institutional investors. Proceeds from a TLB are used to either refinance an existing debt or to make overseas acquisitions to enhance a company’s offerings.

The NCLT move comes on the heels of BYJU’s announcing its financial results, where it accepted that Whitehat Jr. dragged losses.

BYJU’s claimed the lenders’ move comes as part of “the failure of Whitehat Education Technology Pvt. Ltd, a wholly owned subsidiary of Think & Learn, to guarantee the term loan.”

The provision of such a guarantee would violate the status quo of RBI regulations, “and are on foot before the Delaware appellate courts on this issue”, the embattled edtech added.

BYJU’s went on to accuse the lenders of making “unsuccessful attempts” to interfere with the company’s rights to deal with capital provided under the loan agreement. 

“The Delaware Chancery Court has rightfully refused to let the lenders do so, and lenders’ subsequent attempts on this front have been unsuccessful.  

Incidentally, the Delaware court has also refused to interfere with BYJU’S rights to disqualify distressed asset fund lenders under the loan agreement - who continue to take these steps in an attempt to get BYJU’s to succumb to their extortionate demands. 

The edtech also claimed being in regular touch with lenders, also involving them in the sales process of US subsidiaries to settle matters.  

BYJU’s had bought US-based kids learning firm Epic in 2022 for $500 million, and was looking to source somewhere around $800 million to $1 billion from selling it along with Great Learning, which is its upskilling platform.

The timing of these proceedings is also conspicuous as it coincides with the commencement of a rights issue by the parent company of BYJU’S, and does not reflect the “true financial standing” of the company, BYJU's said.

Notably, the company has planned a rights issue in February to raise funds at a lower valuation to ensure liquidity support, their Chief Financial Officer Nitin Golani told PTI.

The company said it is committed to “dialogue” to resolve the matter.

"We firmly maintain that we are a resilient, viable entity that is incrementally charting a path towards sustainable growth," the company affirmed.