Byju’s, one of India’s prominent tech startups, has lost one of its units to lenders after defaulting on a $1.2 billion loan. Lenders, including Redwood Investments LLC and Silver Point Capital LP, exercised their contractual rights to take control of Byju’s Alpha, a special-purpose company formed for financing purposes.
Delaware Chancery Court Judge Morgan Zurn ruled in favor of the lenders, stating that they were justified in replacing a relative of Byju Raveendran, the company’s founder, on the board of Byju’s Alpha with their own nominee. The judge also dismissed Byju’s complaint that Timothy Pohl, appointed by lenders to oversee the special-purpose entity, had improperly assumed control. Judge Zurn explained that Pohl became the sole director of Byju’s Alpha due to the defaults.
The lenders have been pressuring Byju’s to repay the $1.2 billion loan as the company faces financial distress following the decline of the online learning boom during the pandemic. Byju’s has been working to sell assets and address the loan issue, but government investigators conducting a search of the company’s offices added to its challenges. The lender dispute has also led some investors to devalue their stakes in the ed-tech giant.
The lenders’ lawyer previously stated that Byju’s Alpha was established as a holding company to protect their rights in the case. They clarified that their intention was not to take over the entire ed-tech company. Byju’s, based in Bengaluru, India, has not responded to requests for comment regarding the court ruling.
Pohl, appointed as the sole director of Byju’s Alpha, removed all company officers and assumed the role of CEO. The loan lawsuit was filed by Glas Trust Co., acting as trustee for the lenders. Pohl was entrusted by the trust to oversee Byju’s Alpha on behalf of the creditors. Byju’s argued that Pohl, a former lawyer, was receiving excessive fees for his role, but Judge Zurn rejected this claim, stating that his monthly pay of $75,000 was authorized by a “status-quo” order to protect Byju’s Alpha.
The case is titled Glas Trust Company v. Ravindran and is being heard in the Delaware Chancery Court in Wilmington. The lenders’ spokesperson expressed satisfaction with the court’s decision, stating that Byju’s had repeatedly defaulted on its loan obligations, and the lenders reserved all available rights.
(Note: This article has been rewritten and is based on information from a syndicated feed. The headline has not been edited by NDTV staff.)
