US lenders challenge Byju's claim on debt, demands full repayment of $1.2 billion loan

BYJU’s Crisis: US lenders, led by Glas Trust, have contested recent claims made by Byju Raveendran, that the verified debt of BYJU'S is a mere Rs 20 crore. They claim that the beleaguered ed-tech firm ought to pay the full amount of $1.2 billion Term Loan B (TLB) along with its interest.

During the ongoing process of insolvency proceedings, BYJU'S and Think and Learn (TLPL) founder Raveendran stated last week that the verified debt value is a modest Rs 20 crore. This may be enough to exempt him from the US lenders' claim, but a term loan lender steering committee for Byju's Alpha, Inc., dismissed the statement saying it's a liability of Byju's to clear the entire amount with interest.

Glas Trust Sues BYJU'S for $1.2 Billion

The Glas Trust has filed cases in the US and India against BYJU'S Alpha for allegedly mismanaging the account to the tune of $1.2 billion TLB. The lenders aver BYJU'S Alpha accessed the loan from institutional investors, then wired out $500 million from the US in violation of the loan agreement.

BYJU disputes these allegations, pointing out that the loan having been made repayable in November 2026 was accelerated improperly and prejudicially in March 2023 by the lenders. The company also disputes the validity of the claims made by Glas Trust about the failure to acknowledge the debt claim by IRP of about $1.35 billion by Glas Trust.

Issues related to BYJU'S Leadership and Management

Management issues have gone significantly higher for the lenders' panel. The lenders' panel statement also indicated that a good number of key people have already left BYJU, including its CEO, CFO, and General Counsel. The lenders' panel also pointed out that a second auditor resigned within less than two years when the auditor could not reasonably account for the $500 million among other cases.

By way of response, Byju Raveendran avers that the lenders of Glas Trust are forbidden from recovering dues. The credit agreement, according to Raveendran, empowers the parent company TLPL to debar the lenders and it is such a right that he alleges Timothy R. Pohl has violated, whom the Delaware court has declared as the sole director of BYJU's Alpha, Inc. Raveendran submits that Pohl cannot debar lenders.

Legal Proceedings and Loan Valuation Disputes

Opposing Raveendran's argument that the lenders have to establish in New York court that they are not a distress fund to carry their demand further, the panel observed, "That the New York litigation need not preclude the current process; nor is it relevant whether or not the validity of Glas Trust's claim remains unaffected by the trading price of the loan instrument.".

The panel said that the TLB instrument price does not affect the validity of Glas' claim or the amount owed by BYJU'S. "BYJU'S had borrowed $1.2 billion in additional interest and the repayment does not change with variations in loan trading prices," it added.