In a recent development involving BYJU’S, the edtech giant’s US-based creditors have approached the National Company Law Tribunal (NCLT) seeking to restrain the company from pledging, selling, or transferring its shares. This request underscores the ongoing financial turmoil facing the company.
Creditors’ Concerns
During a hearing on May 29, the creditors claimed that BYJU’S was borrowing additional funds and using its shares as collateral, a move they argued was detrimental to their interests. They expressed concerns that such actions were “causing grave prejudice” to them.
Insolvency Petition and Allegations
The US-based lenders, represented by Glas Trust Company, a non-bank loan agency, have filed an insolvency petition against BYJU’S. This petition follows allegations that the company’s founder and CEO, Byju Raveendran, had borrowed INR 350 crore in exchange for some of his shares, despite the ongoing insolvency proceedings initiated in February.
The creditors further argued that since Raveendran is based in Dubai, it would be challenging to prosecute and recover funds if he continued to use shares as collateral for new loans. They urged the NCLT to issue an immediate stay order to protect their interests, highlighting that nearly ten insolvency petitions against BYJU’S before the Bengaluru bench of the NCLT reflected the company’s dire financial condition.
BYJU’S Response
In response, BYJU’S legal counsel requested more time to prepare a response to the petition. The company contested the creditors’ allegations, stating that they were unfounded and made without giving BYJU’S and its promoter a fair opportunity to respond. The next hearing is scheduled for June 10.
Background of the Dispute
This legal battle comes three months after the NCLT admitted the insolvency plea filed by BYJU’S creditors. The petition was initiated by Glas Trust Company, which represents the majority of the $1.2 billion Term Loan B (TLB) lenders. These creditors hold 85% of the TLB extended to BYJU’S.
In 2021, BYJU’S secured a $1.2 billion TLB. However, as financial pressures mounted during the funding winter of 2022 and 2023, the creditors demanded immediate partial repayment of the loan during renegotiations. They sought a prepayment of $200 million with a higher interest rate as a condition for restructuring the TLB. Subsequently, BYJU’S ceased making further payments towards the TLB, including interest, leading the creditors to pursue bankruptcy proceedings both in a US court and before the NCLT.
