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Byju’s takes on Redwood in $1.2B lawsuit – accuses them of predatory tactics!

Byju’s takes on Redwood in $1.2B lawsuit – accuses them of predatory tactics!

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Indian edtech giant Byju’s challenges $1.2 billion loan acceleration

Indian online learning platform, Byju’s, has taken legal action against lenders who have unlawfully accelerated the loan period of the company’s $1.2 billion term loan B and committed predatory tactics.

Background

The Bengaluru-headquartered startup has filed a complaint in the New York Supreme Court against Redwood, which, it alleges, has conducted a series of predatory tactics. According to Byju’s, Redwood purchased a significant portfolio of the loan while primarily trading in distressed debt.

Legal action

Byju’s has said they will not make any payments to the term loan B lenders until the dispute is resolved. It also issued a notice to the Redwood entities, seeking their disqualification.

Reasons for legal action

The move follows lenders accelerating the term of the loans unlawfully on the account of “certain alleged non-monetary and technical defaults,” according to Byju’s. This meant that the lenders undertook unwarranted enforcement measures including seizing control of Byju’s Alpha and appointing its management. Byju’s has no choice but to take legal action.

Legal response

Byju’s argued that the TLB lenders “have not demonstrated either irreparable harm or the balance of the harms as required to support a provision restraining” this contractual right of Byju’s.

FAQs

What is Byju’s?

Byju’s is an Indian edtech startup valued at $16.5 billion. It provides online learning tools to millions of students and has become one of the country’s most successful startups.

Why did Byju’s take legal action?

Byju’s took legal action because lenders had accelerated the term of its $1.2 billion term loan B on the account of “certain alleged non-monetary and technical defaults.” Byju’s alleges that lenders had undertaken unwarranted enforcement measures including seizing control of Byju’s Alpha and appointing its management.

What is Redwood?

Redwood is a financial services company that purchased a significant portfolio of Byju’s loan while primarily trading in distressed debt. Byju’s alleges Redwood of conducting a series of predatory tactics.

What is the notice that Byju’s issued to the Redwood entities?

Byju’s issued a notice to the Redwood entities, seeking their disqualification. Once such disqualification takes effect, Redwood would be restrained from exercising critical rights under the TLB, said Byju’s in a statement.

What is a term loan B?

A term loan B is a type of loan provided to companies to help them expand or finance other major initiatives. Term loan B is structured differently from traditional bank loans. It tends to be a more efficient source of capital, with loans ranging from $10 million to more than $1 billion.

Conclusion

Byju’s legal intervention is a significant setback for the lenders who have accelerated the term of the loans under allegations of non-monetary and technical defaults. Byju’s has made it clear that it will not make any payments to the term loan B lenders until the dispute is resolved. The edtech giant showcases industry standards in its dealings and has shown remarkable restraint before pursuing its legal alternatives.

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