Byju's Term Loan Lenders, Agent Initiate Involuntary Chapter 11 Petitions against 3 US-Based Guarantors
Moneylife Digital Team 06 June 2024
The ad hoc group of term loan lenders of Byju's Alpha Inc's US$1.4bn (billion) term loans says that certain holders of the term loans and GLAS Trust Company LLC, as administrative agent and collateral agent of the term loans, have filed petitions under chapter 11 of the US Bankruptcy Code to initiate involuntary chapter 11 proceedings against Epic!, Neuron Fuel (DBA Tynker), and Tangible Play (DBA Osmo), the three US-based guarantors of the term loans, in the US Bankruptcy Court for Delaware district. 
 
In a statement, the lenders say, "Since Byju's began to default on its term loan obligations shortly after we provided Byju's Alpha with financing in 2021, we have made every effort possible to work productively and collaboratively to help BYJU's cure its multiple defaults. However, it is clear that Byju's management has no intention or ability to honour its obligations under the term loans. Indeed, Byju's founders, who also serve as the three directors of the overall enterprise-Byju Raveendran, Riju Ravindran, and Divya Gokulnath-unlawfully diverted US$533mn (million) in loan proceeds, the whereabouts of which are still unknown."
 
"As a result of Byju's failed leadership and mismanagement, significant harm has been done to Byju's businesses and the value of the Company's assets. Shareholders and lenders to the Company have seen the value of their investment deteriorate, employees and vendors have not been paid in a timely manner, and customers have suffered," it says.
 
According to the lenders, among other important goals, they have taken this action to protect and preserve the value of Epic!, Neuron Fuel, and Tangible Play. "We remain committed to their success and ready to infuse the capital necessary to reorganise the businesses. Under the supervision of the Court, the Lenders hope that Epic!, Neuron Fuel, and Tangible Play will benefit from much-needed oversight while a plan is developed to maximise the value of these assets for the benefit of all stakeholders."
 
Byju's had taken a loan from certain US-based lenders in November 2021. For that purpose, a special purpose vehicle (SPV) named Byju's Alpha was incorporated in Delaware.
 
In March this year, the steering committee representing term-loan lenders of Byju's US$1.2bn loan on Friday said that a US judge has ordered to prohibit further movement or use of $533 million by the EdTech company which is owed to lenders.
 
According to the steering committee's statement, the company's co-founders Byju Raveendran and Divya Gokulnath are prohibited by the judge from further transferring or using any of the US$533mn in loan proceeds previously held by Camshaft Capital Fund, and subsequently transferred to an unnamed and unknown offshore trust.
 
Additionally, the court ordered the arrest of William Morton, the founder of Camshaft Capital Fund, following his repeated refusal to appear in court and provide any of the requested information regarding the transfers of the US$533mn in loan proceeds and the current status and location of the funds. (Read: US court orders Byju's to freeze US$533mn owed to lenders )
 
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