Delaware Supreme Court ruling affirms BYJU's defaulted on Term Loan B

BYJU's, from US-based lenders, had raised $1.2 billion Term Loan B (TLB) -- a loan which is issued by institutional investors, through its holding company Byju's Alpha.

Bengaluru: The Supreme Court of the US State of Delaware on Monday affirmed the Delaware Court of Chancery’s opinion which said Byju’s defaulted on a Term Loan B of $1.2 billion raised from US-based lenders through Byju’s special purpose vehicle Byju’s Alpha Inc.

GLAS Trust, the trustee for the US lenders, had approached the Court of Chancery in May 2023, claiming a default in the loan and accelerating the Term Loan to seek early payment. The Delaware Supreme Court on Monday said that GLAS Trust is entitled to “enforce its remedies”.

This order comes just as the Supreme Court of India is scheduled to hear on Wednesday, GLAS’s appeal against a National Company Law Appellate Tribunal ruling which stayed insolvency proceedings against Byju’s and approved its Rs 158.9 crore payment to the Board of Control for Cricket in India.

Welcoming the order, Byju’s US-based lenders said in a statement, “We are gratified the Delaware Supreme Court decisively affirmed what we have known all along: Byju’s breached and defaulted on the credit agreement it knowingly and willingly entered into.”

With this ruling, the lenders are permitted to take control of Byju’s Alpha and demand repayment of the full amount.

For this purpose, the lenders have appointed Timothy Pohl as the sole director of the SPV.

The lenders’ statement further said, “Most notably, this ruling confirms that Byju’s was in default, which both Byju and Riju personally acknowledged when they signed multiple amendments to the credit agreement on Byju’s behalf from October 2022 to January 2023.” This is referring to founder Byju Raveendran and his brother Riju.

In a separate statement, the lenders said, “Byju has attempted to concoct an alternative narrative that Byju’s did not default and to place the blame of the company’s failure on others rather than repay lenders money that is rightfully owed to us, including disclosing what happened to the $533 million of missing loan proceeds.” Byju’s statement in response to the ruling said, “Delaware ruling has no bearing on lender disqualification rights, loan acceleration and GLAS’ legal standing in India.”

Contesting GLAS Trust’s claims, Byju’s added, “The issue of the validity of the acceleration and subsequent enforcement actions taken by GLAS under the credit agreement is still pending adjudication before the New York Supreme Court, which is the only court that has the jurisdiction to do so under the Credit Agreement. Further, Byju’s’ contractual right to disqualify certain aggressive lenders, who deal in distressed debt, remains intact.”