Foreign creditors move U.S. bankruptcy court against 3 entities linked to BYJU’s

Key term loan creditors led by GLAS Trust Company LLC and HPS Investment Partners have reportedly filed a bankruptcy plea in a Delaware court against cash-strapped ed-tech major BYJU's for allegedly siphoning off funds from three units linked to Alpha, BYJU's U.S. subsidiary formed in 2021. Alpha had lost control of these three companies in March 2023 to Glas Trust.

The involuntary Chapter 11 proceedings have reportedly been filed against Neuron Fuel Inc., Epic! Creations Inc. and Tangible Play Inc. for not disclosing their financial details and BYJU's has been accused of siphoning money from these companies.

When asked, a BYJU's spokesperson refused to share any response, saying the company is still evaluating its response in discussions with lawyers.

BYJU's had set up its U.S. unit, Alpha, to receive a term loan worth $1.2 billion from a clutch of creditors in November 2021. These lenders allege that they tried everything to help BYJU's overcome multiple defaults since the time they released the facility. They allege the company seems to have no intention to repay the loan.

BYJU's parent company Think & Learn Pvt Ltd was also dragged to bankruptcy court in Bengaluru in January 2024 after it defaulted on its $1.2 billion term loan payments. The case is ongoing.

Just last month, ace banker Rajnish Kumar and venture capitalist TV Mohandas Pai decided not to renew the contractual agreement with BYJU's, which was scheduled to end on June 30, 2024. “Our engagement with the Company as advisors was always on a fixed term basis for a year. Based on our discussions with the founders, it was mutually decided that the tenure of the advisory council should not be extended. Though the formal engagement concludes, the founders and the company can always approach us for any advice. We wish the founders and the company the very best for the future,” Kumar and Pai said jointly.

In April 2024, BYJU's CEO Arjun Mohan also left the company seven months after joining in September 2023. To lead the India unit, founder Byju Raveendran later decided to spearhead the daily operations.

The NCLT, in its previous order, on a petition filed by four foreign shareholders, had instructed the company to hold the funds received from the rights issue in an escrow account. BYJU's $200 million rights issue had been fully subscribed in February 2024. It was aimed at giving BYJU's the capital it needs to repay liabilities and provide growth capital.

As the company struggles financially, Byju Raveendran’s net worth fell from $2.1 billion a year ago to zero in April this year. The poster boy of the Indian startup scene, whose ed-tech platform BYJU's rose to its prominence and hit a $22 billion valuation in 2022, has of late been caught up in controversies over foreign funding, fund crunch, layoffs and legal tangles with foreign investors.