Byju’s loses unit to lenders after Delaware court ruling in $1.2 billion loan default case
The court ruling allowed the lenders to replace Byju Raveendran’s relative on the board of Byju’s Alpha with their nominee, Timothy Pohl
A court in Delaware, US, has ruled that lenders to Byju’s, the Bengaluru-based education-technology company, were within their contractual rights to take control of Byju’s Alpha, a unit of the company.
The lenders, which include Redwood Investments LLC and Silver Point Capital LP, cited Byju’s default on a $1.2 billion loan. Delaware Chancery Court Judge Morgan Zurn in a 41-page ruling on November 2 said that the loan terms allowed lenders to take control of pledged Byju’s Alpha shares if a default triggered that right.
The lenders had filed a notice of default in March 2023 after Byju’s failed to obtain the Indian government’s backing as a loan guarantor, according to a transcript of the judgement.
The court ruling allowed the lenders to replace company's founder Byju Raveendran’s relative on the board of Byju’s Alpha with their nominee, Timothy Pohl. Byju’s Alpha is a special-purpose company formed for financing purposes.
Timothy Pohl was “effectively seated” as the sole director of Byju’s Alpha, ruled Judge Zurn, rejecting Byju’s complaint that Pohl was improperly authorised to take control of the company. Pohl took over as CEO of Byju’s Alpha after removing all the company’s officers. A lawyer representing the lenders had said in a May court hearing that they were not seeking to take over the entire ed-tech company.
"We are pleased the Delaware Chancery Court agrees that Byju's has repeatedly defaulted on its loan obligations," a spokesperson for the lender group said in a statement. "The lenders reserve all rights available to them."
The suit over the loan was filed by Glas Trust Company, which serves as trustee for the lenders.
Byju’s has been in financial distress after the online learning boom during the pandemic petered out and left it struggling. The company had been working to sell some of its assets to repay its loans when government investigators searched its offices earlier this year. The fight in the courts with the lenders also led to some of its investors reducing their stakes in the company.