In a further twist to the ongoing saga surrounding BYJU’S and its Term Loan B, an ad hoc group of lenders has taken a significant step by initiating insolvency proceedings against three of the edtech giant’s guarantors in the Delaware district bankruptcy court.
Chapter 11 Petitions Filed
The lenders have filed petitions under Chapter 11 of the US Bankruptcy Code to kickstart involuntary Chapter 11 proceedings against Epic!, Neuron Fuel, and Tangible Play – the three US-based guarantors associated with the Term Loan B secured by BYJU’S beleaguered subsidiary, BYJU’S Alpha. This move follows BYJU’S defaulting on its Term Loan obligations and subsequent disputes over loan proceeds.
Allegations and Intentions
According to the lenders, BYJU’S management has allegedly failed to honor its obligations under the Term Loans, leading to the decision to pursue bankruptcy proceedings against the guarantors. They have accused BYJU’S founders of diverting $533 Mn in loan proceeds, a claim that is currently being disputed in a Delaware court. The initiation of Chapter 11 petitions aims to safeguard the value of Epic!, Neuron Fuel, and Tangible Play while offering oversight and potential restructuring opportunities.
Invitation for Testimonies
In an unconventional move, the lenders have launched a website inviting former employees, students, and vendors of Epic!, Neuron Fuel, and Tangible Play to share their experiences anonymously. This platform seeks insights into outstanding debts and dealings with the three businesses and their leadership.
Response from BYJU’S Awaited
Inc42 has reached out to BYJU’S for comment on this latest development, and the story will be updated upon receiving their response. This move by the lenders comes on the heels of various legal battles and financial challenges faced by BYJU’S, including a recent reduction in the fair value of its investment by US-based asset management firm Baron Capital.
Continuing Legal Battles
The legal proceedings surrounding the alleged diversion of $533 Mn from loan proceeds have been ongoing since March 2023. Despite filing for Chapter 11 bankruptcy protection to investigate and resolve claims related to the missing funds, BYJU’S and its founders remain embroiled in legal disputes over the whereabouts of the diverted funds.
Future Implications
As the bankruptcy proceedings unfold and legal battles continue, the outcome will have significant implications for BYJU’S and its stakeholders. The resolution of these disputes will shape the future trajectory of one of India’s most prominent edtech companies, impacting investors, employees, students, and vendors alike.
