Trouble seems to be mounting for Byju’s. On Thursday, the company faced a setback with two more insolvency petitions being filed against it. Foreign lenders, who have collectively extended more than 85% of the $1.2 billion term loan B (TLB), filed an insolvency petition against the firm in the National Company Law tribunal earlier this week.
Meanwhile on Thursday, France-based Teleperfomance Business Services also filed a similar plea in the tribunal for recovery of its dues. While the petition of the foreign lenders is yet to be taken on record by the registry of the Bengaluru bench of the NCLT, Teleperformance’s plea has been registered.
While the petition of the foreign lenders will fall in the category of financial creditors, Teleperformance being a vendor will fall in the category of operational creditor.
The BCCI has earlier filed an insolvency petition against the edtech firm, which is being heard in the NCLT. When contacted on the foreign lenders moving NCLT against the firm, a Byju’s spokesperson said that the move is 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. Hence any proceedings by lenders before NCLT are premature and baseless,” the spokesperson said.
The company added that the timing of the lenders’ is conspicuous as it coincides with the commencement of a rights issue by the parent company of Byju’s. In July, Byju’s had reached an agreement with the steering committee of the lenders to amend the loan’s terms, including the pricing and tenure, by August 3, 2023.
Byju’s and the lenders have been in a protracted dispute over the use of funds. The disagreements arose soon after the edtech firm secured the $1.2 billion term loan facility (TLB) from the lenders in November 2021. A TLB is a senior secured syndicated credit facility issued by global institutional investors. Typically, the proceeds from a TLB are used to either refinance an existing debt or make overseas acquisitions to enhance a company’s offerings.
On Thursday, Byju’s also said that the initiation of the legal process does not reflect on its financial strength or its ability to meet payment obligations. “We firmly maintain that we are a resilient, viable entity that is incrementally charting a path towards sustainable growth,” the spokesperson said.
In September, Byju’s had said that has it invested the money raised through TLB in high-grade fixed income assets, countering allegations of concealing the money from lenders by putting it in an obscure hedge fund.
Byju’s said that the acceleration and consequent actions by the lenders appear to be based, in part, on the failure of Whitehat Education Technology, a wholly-owned subsidiary of Think & Learn, to guarantee the term loan. This is despite the fact that provision of such guarantee would contravene extant RBI regulations. In fact, proceedings are on foot before the Delaware appellate courts on this very issue, it added.
The spokesperson said that previously too, the lenders have made unsuccessful attempts to interfere with Byju’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,” it added.
The company said that 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.
“In good faith and on a continuous basis, Byju’s has been in regular touch with the lenders and has also involved them in the sales process of some of its prized US subsidiaries to settle matters,” the spokesperson said, adding “as always, we remain committed to a constructive dialogue aimed at a mutually beneficial and amicable resolution of matters”.