Troubled edtech firm Byju’s has faced another hurdle that could further complicate its road to recovery. A Delaware judge has ruled in favour of its lenders in the ongoing $1.2 billion loan dispute.
The judge determined that the lenders, including Redwood Investments LLC and Silver Point Capital LP, were within their contractual rights to take control of a unit of Byju’s, known as Byju’s Alpha, due to a default on the loan, reported Bloomberg News.
The lenders replaced a board member of Byju’s Alpha, who was a relative of the company’s founder, Byju Raveendran, with their own nominee.
The judge, Morgan Zurn, rejected Byju’s complaint that the appointed overseer, Timothy Pohl, was improperly authorized to take control. Zurn stated that Pohl was effectively the sole director of Byju’s Alpha due to the defaults.
Another hurdle
Byju’s has been grappling with the repayment of the $1.2 billion loan, aggravated by the waning of the online learning boom during the pandemic.
The company had been working on selling assets and resolving the loan issue when government investigators conducted searches at its offices, further complicating its situation. As a result of the lender dispute, some investors have devalued their stakes in one of the world’s largest ed-tech firms.
Earlier this year, a lawyer for the lenders argued that Byju’s Alpha was established as a holding company to protect their rights. They clarified that their intention was not to take over the entire ed-tech company.
It may be noted that Byju’s has previously contested the lenders’ default claims.
Meanwhile, a spokesperson for the lender group expressed satisfaction with the Delaware Chancery Court’s ruling, emphasizing their commitment to upholding their rights. “We are pleased the Delaware Chancery Court agrees that Byju’s has repeatedly defaulted on its loan obligations.”.
“The lenders reserve all rights available to them.”
Under the loan agreement terms, the lenders were granted the authority to take charge of the pledged shares of Byju’s Alpha in the event of a default, a ruling established by Judge Zurn on November 2.
When the subsidiary unit failed to secure backing from the Indian government as a loan guarantor, the lenders formally declared a default in March, according to the transcript of the judge’s announcement cited by Bloomberg News.
Following his appointment as the sole director of Byju’s Alpha, Timothy Pohl assumed the role of CEO, effectively displacing all other corporate officers.
The lawsuit pertaining to the loan was initiated by Glas Trust Co., acting as the trustee for the lending parties. Pohl was entrusted to oversee Byju’s Alpha on behalf of the creditors.
Byju’s had expressed concerns regarding Pohl’s compensation, contending that it was excessively high. However, Judge Zurn dismissed these objections, clarifying that Pohl’s monthly remuneration of $75,000 was duly authorised under a “status-quo” order she had issued to safeguard the interests of Byju’s Alpha.
The legal case is formally identified as Glas Trust Company v. Ravindran, filed under reference 2023-0488, within the Delaware Chancery Court located in Wilmington.
For more news and updates from the world of Business, Politics, celebrities from Bollywood and Hollywood, keep reading The Daily Bharat Express.com.
(To get latest news updates, Join our Facebook Page. Click here).
