Damned in Delaware for $1.2-bn default, Byju's fails to regain US arm from lenders
Representative image
The Delaware Supreme Court on September 23 upheld a ruling that found Byju’s in default on its $1.2-billion Term Loan B, dealing another setback to the embattled Indian edtech company.
The US court supported an earlier decision by the Delaware Court of Chancery, allowing Byju’s lenders, represented by Glas Trust LLC, to take control of Byju’s Alpha Inc, the company’s American subsidiary which was pledged as collateral for the loan.
The $1.2-billion loan was provided to Byju’s by a syndicate of 37 financial institutions. Under the loan agreement, Glas Trust, on behalf of the lenders, enjoys the right to enforce their claims if Byju’s had defaulted. In March 2023, the lender issued a notice of default to Byju’s after the company failed to renegotiate the loan terms. Glas sought to take control of Byju’s Alpha Inc after the default.
In August 2023, the Delaware Court of Chancery ruled in favour of Glas, stating that the lenders were within their rights to enforce the agreement. The court determined that Byju’s had failed to meet its financial obligations, and the lenders acted properly by taking control of Byju’s Alpha Inc through a written consent.
Byju’s appealed the decision to the Delaware Supreme Court, arguing that the case should be dismissed due to a separate lawsuit pending in a New York court. The Supreme Court, however, rejected this claim, stating that the Indian company had given up its right to argue the issue by not raising it earlier in the case.
Supreme Court ruling
In its ruling on September 23, the Delaware Supreme Court noted that Byju’s had ample opportunities to address its concerns before the Court of Chancery but failed to do so. The court emphasised that it cannot consider new arguments introduced for the first time on appeal unless the interests of justice require it, which was not the case here.
“We find it difficult to see how judicial economy and finality can square with requiring the parties to retry the case, merely because the Appellants failed to address an issue which they now claim is vital to this case,” the court filing read.
Story continues below Advertisement
With the Delaware Supreme Court ruling, the control of Byju’s Alpha Inc remains in the hands of Glas Trust and its client lenders. The lenders expressed satisfaction with the outcome that strengthened their stance on Byju’s default.
“We are pleased the Delaware Supreme Court affirmed what we’ve known: Byju’s knowingly breached the credit agreement and defaulted. Both Byju (co-founder Byju Raveendran) and Riju (Byju’s board member Riju Raveendran) acknowledged this when signing the amendments between October 2022 and January 2023. The ruling confirms our right to accelerate the loan and take control of Byju’s Alpha Inc,” the lenders said in a statement.
They also criticised co-founder Byju Raveendran. “Byju has falsely portrayed the default and tried to shift blame instead of repaying what is owed, including explaining the missing $533 million. Today’s ruling confirms that our actions have been proper, and Byju’s statements are nothing but lies.”
Glas Trust, which has sued Byju’s for the recovery of $1.2 billion loan in US as well as in India, was recently removed from the Committee of Creditors (CoC) in the ongoing insolvency case against Byju’s. This decision was made by Insolvency Resolution Professional (IRP) Pankaj Srivastava, after determining that Glas Trust no longer meets the requirement of representing at least 51 percent of the lenders.
The lender has contented the decision in the Supreme Court.