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The Delaware Supreme Court has upheld a ruling that Byju’s defaulted on its $1.2-billion Term Loan B, allowing lenders to take control of Byju’s Alpha Inc., the company’s US subsidiary.
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The court’s decision validates the lenders’ claim that Byju’s breached its financial obligations, despite the company’s attempts to contest the claim.
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Byju’s had obtained the loan from a consortium of 37 financial institutions, with Glas Trust acting on behalf of the lenders in the event of default.
In a significant setback for Byju’s, the Delaware Supreme Court has upheld a ruling that the Indian edtech firm defaulted on its $1.2-billion Term Loan B. This decision allows Byju’s lenders, represented by Glas Trust LLC, to assume control of Byju’s Alpha Inc., the company’s US subsidiary that was used as collateral for the loan. Timothy Pohl has been appointed as the sole director of Byju Alpha Inc for this purpose ¹ ²[3).
The lenders had issued a default notice to Byju’s in March 2023 when the company failed to renegotiate the loan terms. Byju’s had appealed the ruling, arguing that the lawsuit should be dismissed due to a pending case in a New York court. However, the Delaware Supreme Court denied this argument, stating that Byju’s had waived its right to raise the issue by not doing so earlier in the proceedings.
The Delaware Supreme Court’s ruling aligns with the judgment by the Delaware Court of Chancery, which had ruled in favor of Glas in August 2023. The court determined that Byju’s had breached its financial obligations, giving justification to the lenders’ action in assuming control of Byju’s Alpha Inc. through written consent. Byju’s has maintained that the Delaware ruling has no bearing on the ongoing legal proceedings in India.
Byju’s had raised the $1.2 billion Term Loan B from US-based lenders through its holding company Byju’s Alpha. The lenders have claimed that Byju’s founder and CEO, Byju Raveendran, and his brother Riju Ravindran voluntarily conceded that Byju’s was in default of the credit agreement by October 2022. The lenders have also raised concerns about the missing $533 million loan proceeds, which Byju’s has failed to disclose.
