Byju’s files suit against TLB acceleration in New York Supreme Court

Jun6,2023 #Byju
Byju Law Insider

LI Network

Published on: 06 June 2023 at 12:04 IST

Edtech giant Byju’s has announced that it has taken decisive action by filing a complaint in the New York Supreme Court.

The purpose of this legal action is to challenge the acceleration of the $1.2 billion Term Loan B (TLB) and to disqualify Redwood.

Byju’s claims that Redwood, in violation of TLB terms, acquired a significant portion of the loan while primarily engaging in distressed debt trading. Byju’s has been compelled to take these measures due to a series of predatory tactics employed by the lenders, led by Redwood.

Byju’s stated that on March 3, 2023, the TLB lenders wrongfully accelerated the TLB, alleging certain non-monetary and technical defaults. The company expressed that following this unjust acceleration, the TLB lenders undertook unwarranted enforcement actions, such as seizing control of Byju’s Alpha and appointing their own management. Additionally, the TLB lenders, through their agent GLAS Trust Company, initiated litigation in Delaware to validate these actions.”

During the Delaware proceedings, Byju’s revealed that the TLB lenders made an unsuccessful attempt to deprive the company of its contractual right to “disqualify” lenders primarily involved in opportunistic trades. Byju’s stated that the Delaware court rejected this attempt, ruling that the TLB lenders failed to demonstrate irreparable harm or a balance of harms necessary to support a provision restraining Byju’s contractual right.

However, Byju’s claimed that the TLB lenders continued to behave in a high-handed manner. They issued a notice demanding immediate payment of the entire TLB amount, despite being aware that the acceleration was being challenged in court. Furthermore, the TLB lenders’ agent refused to disclose the identities of the TLB lenders to Byju’s, a right that Byju’s is entitled to under the TLB. Additionally, the TLB lenders consistently undertook actions to tarnish Byju’s reputation.

At the same time, the company said that the Redwood – a lender known to primarily trade in distressed debt – consistently increased its exposure by acquiring a sizeable stake in the TLB with the intent of making windfall gains.

“In the wake of all these actions, Byju’s was left with no option but to commence proceedings in New York – the contractually agreed forum – challenging the acceleration,” said the company.  Along with this, Byju’s has also issued a notice to the Redwood entities disqualifying them. Once such disqualification takes effect, Redwood would be restrained from exercising critical rights under the TLB. Byju’s said it had so far demonstrated remarkable restraint by refraining from utilising the disqualification clause, instead striving for months to achieve an amicable resolution with the hawkish trader-lenders.

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