A Delaware court has rejected a request by edtech major Byju’s Term Loan B lenders to investigate into $500 million transfer from its US-based subsidiary BYJU’S Alpha to other entities, according to a PTI report quoting details shared by sources. Byju’s had denied allegations levelled by its $1.2 billion Term Loan B lenders, saying it has never defaulted on the payments.
Meanwhile, Dutch-listed technology investor Prosus NV has cut the valuation of troubled Indian edtech startup Byju’s to $5.1 billion according to its annual report, a fall of more than 75 per cent from the startup’s $22 billion valuation last year.
Prosus cut the value of its 9.6 per cent stake in Byju’s to around $493 million in the financial year ended March 31, the report added, days after it stepped down from Byju’s board along with other investors. Prosus is the company’s biggest investor shareholder.
“Rejecting the lenders’ application for information in relation to the $500 million (part of the funds received by Byju’s Alpha), the Vice Chancellor remarked that lenders had “no basis to further investigate the transfer,” the sources said, according to PTI. In doing so, the Vice Chancellor has put a stop to the lenders’ unwarranted fishing expedition and attempted to introduce a non-issue into the proceedings, which is limited to determining the control of Byju’s Alpha,” a source said, according to PTI.
TLB Lenders, through their agent, GLAS Trust Company, have filed suit against BYJU’S US-based subsidiary for moving out USD 500 million from BYJU’S Alpha and on other issues around TLB — a loan which is issued by institutional investors.
The report also quoted the order copy of Judge Morgan Zurn shared by a source: “Plaintiff may rely on Ravindran’s reaction as evidence that he perceived an Event of Default has occurred, and for other admissible purposes, but Plaintiff has no basis to further investigate the transfer itself in this action”. The rejection of the lenders’ request brings a sigh of relief for BYJU’S, which has been trying to assuage investors over issues around its financial performance.”
BYJU’S has filed suit in the New York Supreme Court to challenge the acceleration of the USD 1.2 billion Term Loan B and to disqualify lender Redwood and thereafter stopped making payments that were due for the loan. In a statement in the first week of June, BYJU’S alleged that Redwood consistently increased its exposure by acquiring a sizable stake in the TLB with the intent of making windfall gains.
BYJU’S had said that the TLB lenders made an unsuccessful attempt in the Delaware proceedings to deprive BYJU’S of its contractual right to disqualify’ lenders engaged primarily in opportunistic trades. The Delaware court rejected this attempt, ruling that the TLB lenders “have not demonstrated either irreparable harm or the balance of the harms as required to support a provision restraining” this contractual right of BYJU’S, the company said.
BYJU’S alleged that the TLB lenders’ agent has even refused to provide identities of the TLB lenders to BYJU’S, which it is entitled to under the TLB, and the lenders have consistently taken measures to smear BYJU’S reputation. The edtech major said that it was left with no option but to commence proceedings in New York the contractually agreed forum challenging the acceleration. Along with this, BYJU’S has also issued a notice to the Redwood entities disqualifying them.
Once such disqualification takes effect, Redwood would be restrained from exercising critical rights under the TLB, according to the company. Email sent to BYJU’S and GLAS Trust elicited no reply.
Byju’s, which has a total valuation of about $22 billion, has been facing troubles since it missed deadlines to file audited financial accounts.
Last week, edtech giant Byju’s also started laying off employees across departments to cut costs amid increased tension with lenders. According to reports, the number of layoffs is likely to be above 1,000 employees, mostly senior staff who have spent over 2 years.
(With Inputs From Agencies)
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