Ed-Tech Company Byju’s and Its Lenders Agree to Settle Dispute Over $1.2B Loan
Indian ed-tech giant Byju’s will settle a dispute over the terms of a $1.2 billion loan by Aug. 3, the lenders announced, following a lawsuit the group filed against the company in May.
The loans’ backers, who own more than 85 percent of the deal first originated in November 2021, said both parties agreed to complete an amendment to the loan’s terms and settle the ongoing dispute prior to next week’s self-imposed deadline.
Byju’s did not return a request for comment on the settlement agreement.
The agreement could signal an end to one of the company’s recent headaches, as media outlets have reported Byju’s has also faced scrutiny from Indian regulators, as Bloomberg detailed, as well as public departures from its board, first reported by TechCrunch, and criticism from a key investor.
Byju’s — which offers an interactive digital learning platform for subjects like reading, math, coding, and the arts as well as tutoring and other ed-tech tools — has stood out as a juggernaut in the ed-tech field. The company has grown rapidly after raising more than $6 billion since it was founded in 2011, and it has acquired a slew of ed-tech companies along the way.
The U.S.-based lenders’ initial complaint was filed in Delaware Chancery Court by Glas Trust Company and investor Timothy Pohl against Byju’s Alpha, a nonoperational entity created solely to house and collateralize the loan, as well as Riju Raveendran, who is co-founder Byju Raveendran’s brother and a company leader, and Tangible Play, a U.S.-based Byju’s subsidiary.
The lenders accused Byju’s of “repeated and ongoing breaches” of the credit agreement by not providing them with updated financial data, according to the complaint and briefs, as well as breaching the terms of the loan agreement and fraudulently moving $500 million in an attempt to hide the funds.
Byju’s denied the allegations that said it violated terms of the loan agreement and said the claims “are related to an inconsequential technical matter.”
The ed-tech company further alleged that the lenders are forcing Byju’s to default on the loan in order to extract more economically favorable terms for them, and the lawsuit was filed to create additional leverage in those negotiations.
Byju’s in June filed a legal complaint in New York court against the lenders echoing those claims and said it would not make any further payments on the debt until the legal process was complete.
A Focus on ‘Working Constructively’
The lenders called Byju’s lawsuit “meritless” at the time and said the group was “comprised of 21 highly respected global institutional investors” who have “sought to work constructively with the company over the past nine months to cure its numerous defaults and will continue to do so in good faith.”
The agreement announced this week is the result of those efforts, the lending group said. Completing an amendment to the loan terms by Aug. 3 would end the ongoing litigation and prevent further enforcement actions.
“This announcement is consistent with our stated goal of working constructively with Byju’s management to protect the value of the franchise,” the lenders’ steering committee said in a statement. “We look forward to completing the loan amendment over the next two weeks and are committed to doing our part to deliver on our agreed-upon timeline.”
Byju’s has recently faced scrutiny from Indian regulatory authorities and the reported resignation of board members, including representatives from the Chan Zuckerberg Initiative and Netherlands-based global investment firm Prosus, as TechCrunch reported.
Its auditor, Deloitte, also reportedly ended its auditing relationship with the firm last month, citing delays in receiving financial statements from Byju’s.
And on Tuesday, Prosus, one of Byju’s largest investors, publicly criticized the India-based company in a statement. The investment firm claimed executive leadership at Byju’s “regularly disregarded advice and recommendations relating to recommendations relating to strategic, operational, legal, and corporate governance matters.”
Prosus’ Director Russell Dreisentock left the board because he felt he was prevented from fulfilling his fiduciary duty, the investor group added in the statement.
The firm, which has invested $563 million in Byju’s since 2018, cut its own valuation of Byju’s from $22 billion to about $5.14 billion last year, according to its annual report issued in June. It also said the group “lost significant influence in Byju’s” in September 2022 and stopped equity accounting for the company at that time.
In its statement, Prosus also stressed its commitment to the Indian education market and that despite not having a representative on the board, the firm “continue to believe in the potential of Byju’s and its role in revolutionising access to quality education in India and around the world,” it said.
The firm said it will also “continue to assert its rights, collaborating with other shareholders and government authorities to safeguard the long-term interests of the Company and its stakeholders.”
Image by Getty.
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