Byju's faces setback as US court upholds $1.2 billion loan default ruling

The court's decision supports an earlier ruling made by the Delaware Court of Chancery, which allowed the company's lenders, represented by Glas Trust LLC, to seize control of Byju's Alpha Inc

In Short

• Ruling supports lenders taking control of Byju's Alpha Inc
• Byju's appeal rejected, US Court cites previous chances
• Loan was from 37 financial institutions, enforced by Glas Trust

The Delaware Supreme Court on September 23 ruled against Byju’s, upholding a previous decision that found the Indian edtech company in default on its $1.2 billion Term Loan B.

The decision by the US court adds another blow to Byju’s, which has been facing several challenges in recent months.

The court’s decision supports an earlier ruling made by the Delaware Court of Chancery, which allowed the company’s lenders, represented by Glas Trust LLC, to seize control of Byju’s Alpha Inc, a key American subsidiary. This subsidiary had been pledged as collateral for the loan.

The $1.2 billion loan was originally extended to Byju’s by a group of 37 financial institutions. The loan agreement gave Glas Trust, acting on behalf of the lenders, the right to enforce their claims if Byju's defaulted.

In March 2023, the lenders issued a notice of default after Byju’s failed to renegotiate the loan’s terms. Following the default, Glas Trust sought to take control of Byju’s Alpha Inc., which was central to securing the loan.

In August 2023, the Delaware Court of Chancery ruled in favour of Glas Trust. The court determined that Byju’s had failed to meet its obligations under the loan agreement and that Glas and the lenders were entitled to take control of Byju’s Alpha Inc. through written consent.

Byju’s appeal rejected

Byju’s appealed the decision, asking the Delaware Supreme Court to dismiss the case.

It argued that the matter should be put on hold due to a separate lawsuit pending in a New York court. However, the Supreme Court rejected this argument, stating that Byju’s had forfeited its right to raise the issue by not addressing it earlier in the case.

The Delaware Supreme Court’s ruling said that Byju’s had been given multiple chances to raise its concerns before the Court of Chancery, but the company failed to do so.

"We find it difficult to see how judicial economy and finality can square with requiring the parties to retry the case, merely because the Appellants failed to address an issue which they now claim is vital to this case," the court stated in its ruling.

Following the court’s decision, control of Byju’s Alpha Inc. will remain in the hands of Glas Trust and the group of lenders. This subsidiary is a significant asset for the company and was initially offered as collateral to secure the loan. The lenders welcomed the ruling, which bolstered their position on Byju’s default.

“We are pleased that the Delaware Supreme Court affirmed what we’ve known: Byju’s knowingly breached the credit agreement and defaulted,” the lenders said in a statement.

They added that Byju Raveendran, the company’s co-founder, and Riju Raveendran, a board member, had acknowledged the default when they signed amendments to the agreement between October 2022 and January 2023. The lenders also noted that the ruling confirmed their right to accelerate the loan and take control of Byju’s Alpha Inc.