Lenders have accused Byju’s Alpha, a prominent Indian tech company, of concealing $500 million amid a legal battle for control of the company.
The allegation emerged during a court hearing in Delaware, where Byju’s Alpha is being sued over ownership rights.
The lenders argue that due to a previous default, they have the authority to appoint their representative Timothy R Pohl, in charge
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This dispute adds to the challenges faced by Byju’s, a fast-growing startup founded by Byju Raveendran.
The company was already working to satisfy creditors seeking to restructure a $1.2 billion term loan when government investigators conducted a search of their offices in April.
During the recent hearing, it was revealed a senior manager at Byju’s Alpha had admitted to transferring $500 million out of the company.
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The move was allegedly an attempt to safeguard the funds from predatory lenders.
Byju’s Alpha’s lawyer asserted that the company had the right to make such transfers according to the loan agreement.
Byju’s Alpha’s attorney further emphasized that the company is up to date on all debt payments and any defaults should be considered technical breaches of the loan agreement.
Meanwhile, the Delaware Chancery Court Judge, Morgan Zurn, did not pass judgment on the appropriateness of the fund transfer.
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However, the judge did side with the lenders by ordering Byju’s Alpha managers to refrain from making significant changes within the company.
The lawsuit was filed against Byju’s Alpha, its director Riju Ravindran, and Tangible Play Inc. by Glas Trust Company.
These entities are subsidiaries of Think and Learn Private, the edtech conglomerate established by Byju Raveendran.
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The lenders contend that they need control over Byju’s Alpha as it is a holding company in order to protect their rights, rather than seeking a complete takeover of the entire edtech company.
Byju’s Alpha argues that the lenders, who are distressed debt investors, are attempting to profit from the company’s debt.
The company stated during the court hearing that it would receive a significant capital infusion within two weeks, enabling it to repay the $1.2 billion owed to creditors.
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Byju’s Alpha’s lawyer asserted that the lenders have been engaged in a campaign to harm the business and have no intention of running the company.
The case, Glas Trust Company vs. Riju Ravindran, 2023-0488, is currently being heard in the Delaware Chancery Court in Wilmington.
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