A group of ad hoc term loan lenders, who collectively own more than 85% of BYJU’S USD 1.2 billion term loan, issued a statement in response to the lawsuit the edtech firm filed in the US, calling it a “meritless” action to avoid repayment.

BYJU’S Faces Resistance from Term Loan Lenders, Calls Lawsuit 'Meritless'

The lender group, consisting of 21 highly respected global institutional investors, accused BYJU’S of attempting to evade its obligations, including making contractually required payments. The lenders have been working constructively with the company over the past nine months to address its multiple defaults and intend to continue doing so in good faith. However, they made it clear that if BYJU’s intentionally remains in default, they will exercise all available rights to enforce the credit agreement.

BYJU’s Legal Action Against Term Loan Lenders

The Bengaluru-based edtech company took legal action in the Supreme Court in New York regarding the acceleration of a USD 1.2 billion Term Loan B (TLB) and the disqualification of Redwood, one of the lenders. BYJU’S claims that the lenders, led by Redwood, employed predatory tactics, including unlawfully accelerating the loan and attempting to take control of BYJU'S Alpha, the company entity. 

BYJU’S stated that on March 3, 2023, the TLB lenders unlawfully accelerated the loan due to alleged non-monetary and technical defaults. As a result, they took unwarranted enforcement measures, such as seizing control of BYJU’S Alpha and appointing their own management. The company argued that ongoing legal proceedings have caused a dispute over the loan, leading to a halt in further payments, including interest.

Disqualification of Redwood and Grievances

In addition to the grievances against the TLB lenders, BYJU’S specifically targeted Redwood, a lender known for trading in distressed debt. Redwood had been steadily increasing its stake in the TLB, aiming to profit from the situation. BYJU’S issued a notice disqualifying the Redwood entities, which would limit their exercise of critical rights under the TLB.

BYJU’S Continues to Trim Workforce Amid Financial Challenges

While dealing with the escalating tensions with its creditors, BYJU’S is reportedly planning to cut at least 1,000 more jobs. This move comes six months after a significant round of layoffs. The sales and marketing teams are expected to be most affected by the latest cost-cutting measures. Managers have been instructed to terminate two employees each from the sales and marketing teams of BYJU’S 280 tuition centers in India. Approximately 150 marketing managers may also be let go. Severance pays equivalent to two months' salary will be provided due to the severe cash crunch. Several senior managers and assistant general managers have already left the company.

ED Searches at BYJU's

In April this year ED had conducted searches and seizures at three premises in Bengaluru in connection with a case lodged against Raveendaran Byju and his company ‘Think & Learn Private Limited’ under the provisions of the FEMA rules.

According to a media report, ED, in a tweet later said that they collected various incriminating documents and digital data during its searches. 

It was also alleged that the company has received foreign direct investment to the tune of Rs 28,000 crore (approximately) between 2011 to 2023.

Further, the company has also remitted about Rs 9,754 crore to various foreign jurisdictions during the same period in the name of overseas direct investment. 

Later, a Byju’s spokesperson had said that the ED visit “was related to a routine inquiry under FEMA and there has been no violations under FEMA by BYJU'S.

The edtech firm then came out to say that it will continue to work closely with the authorities to ensure that they have all the information they need.

BYJU’s is grappling with challenges on multiple fronts as it faces resistance from its term loan lenders and strives to streamline operations and reduce costs, resulting in job cuts within the sales and marketing teams. In addition, the company's recent encounter with a probe by the Enforcement Directorate over alleged violations of the Foreign Exchange Management Act (FEMA) further compounds its setbacks. These developments highlight the difficult situation that BYJU’s currently finds itself in.