Byju's sues lender Redwood, skips $40 million loan payment

Edtech giant Byju's has sued investment management firm Redwood, challenging the acceleration of a $1.2 billion term loan B (TLB) facility. In its plea filed in the US Supreme Court, the company has sought disqualification of Redwood, one of its lenders for using "predatory tactics".  Byju's accused the creditor of acquiring sizeable stakes in TLB with the intention of making "windfall gains".

Byju’s said Redwood acquired a sizeable chunk of the loan while primarily trading in distressed debt, undermining the conditions of the term loan facility.

The company has decided against making any further payment on a $1.2 billion loan after a dispute with the lenders. The edtech platform was scheduled to pay $40 million in interest against the loan, on Monday. However, it chose to default, reported Bloomberg.

Byju’s is already involved in a separate lawsuit against its lenders in a Delaware court over nonpayment.  The lenders have proposed a takeover of the company's US entity, Byju's Alpha after the loan default earlier this year.

“Given that legal proceedings are now on foot in both Delaware and New York, it is clear that the entire TLB is disputed. As such, Byju’s cannot be expected to and has elected not to make any further payment to the TLB lenders, including any interest, until the dispute is decided by the court,” Byju's said in a statement.

The company added that it was willing to discuss and continue making payments under the TLG, provided "lenders withdraw their ill-conceived actions and honour the terms of the agreement.”

Byju's creditors have not been positive in response to the company's attempt to strike a deal for restructuring the loan after the slowness in business. Byju's had seen tremendous growth during the COVID-19 pandemic. The company has maintained that its decision not to make any loan payment doesn’t indicate financial troubles.

Founded by educator Byju Raveendran in 2015, the edtech platform is the highest-valued Indian startup of the last decade. Byju's is backed by Tiger Global Management, Mark Zuckerberg’s Chan Zuckerberg Initiative and Silver Lake Management and Naspers Ltd.