A Delaware judge ruled that Byju’s lenders were within their rights to take over control of a unit of the education-technology provider after it defaulted on a $1.2 billion loan.
The lenders, which include Redwood Investments and Silver Point Capital, replaced a relative of company founder Byju Raveendran with their own nominee on the board of Byju’s Alpha, a special-purpose company formed for financing purposes.
Byju’s argued that the lenders’ nominee, Timothy Pohl, was improperly authorized to take over, but the judge rejected that claim. She said that Pohl was “effectively seated” as the sole director of Byju’s Alpha because of the defaults.
The lenders have been pressing hard for repayment of the loan amid Byju’s mounting financial distress. The company has been selling assets and trying to deal with the loan issue, while government investigators have searched its offices. The lender fight has also prompted some investors to write down their stakes in Byju’s.
Byju’s didn’t immediately respond to a request for comment. The company had previously said that the lenders’ default arguments were bogus.
The lenders said they are pleased with the judge’s ruling and that they reserve all of their rights.
The loan terms allowed the lenders to take control of pledged Byju’s Alpha shares if a default triggered that right. The lenders filed a notice of default in March after a company unit failed to get the Indian government’s backing as a loan guarantor.
After Pohl was appointed as sole director of Byju’s Alpha, he removed all of the company’s officers and took over as CEO. The suit over the loan was filed by Glas Trust Co., which serves as trustee for the lenders.
Byju’s complained that Pohl’s pay was excessive, but the judge rejected that argument, saying that his $75,000-per-month salary was authorized by a court order.
The case is Glas Trust Company v. Ravindran, 2023-0488, Delaware Chancery Court (Wilmington).