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Byju’s Alpha Inc., the American arm of India’s renowned ed-tech company Byju’s, has filed for Chapter 11 bankruptcy in a Delaware court, citing a default on a staggering $1.2 billion debt.
NEW DELHI: Byju’s Alpha Inc., the American arm of India’s renowned ed-tech company Byju’s, has filed for Chapter 11 bankruptcy in a Delaware court, citing a default on a staggering $1.2 billion debt. The move comes on the heels of escalating troubles for the online tutor, as key investors, including General Atlantic, Prosus Ventures, Peak XV, and Chan Zuckerberg Initiative, initiated moves to oust co-founder and CEO Byju Raveendran.
Alpha Inc.’s court-appointed CEO, Timothy Pohl, cited a lack of funds to defend against litigation as the primary reason for initiating insolvency proceedings. The court documents reveal that Alpha has listed assets in the range of $500 million to $1 billion, with an estimated 100 to 199 creditors.
The bankruptcy filing represents a pivotal moment in Byju’s struggle, offering a temporary reprieve from ongoing legal battles. Legal experts suggest that the Chapter 11 petition would allow Byju’s Alpha to halt proceedings against it in the U.S., providing a window for debt restructuring and financial stabilisation.
Aaron Solomon, managing partner at Solomon & Co, Advocates and Solicitors, stated, “This Chapter 11 filing would effectively put the assets and cash flows of Byju’s Alpha beyond the reach of the lenders to Byju’s India.” Within the next 120 days, Byju’s Alpha must file a reorganisation plan with the U.S. Courts, offering a chance for potential revival under a debt restructuring strategy.
At the core of Byju’s financial challenges lies its ambitious expansion in 2020 and 2021, marked by the acquisition of 10 companies. During this period, Byju’s established Alpha in the U.S. as a special-purpose vehicle, which received $1.2 billion in loans in 2021. The recent crisis unfolded when creditors, led by Glas Trust, expressed dissatisfaction over Byju’s failure to secure WhiteHat Jr. as a guarantor for the massive loan.
Byju’s, once valued at $22 billion in 2022, has faced a significant decline in its valuation, with some investors suggesting a current valuation between $1 billion and $3 billion. The company recently sought to raise $200 million through a rights issue of shares to address immediate liabilities.
The bankruptcy filing follows a series of legal battles, including Glas Trust seizing control of Alpha in March last year and allegations of fund transfers to conceal cash whereabouts. Byju’s lenders also filed an insolvency application against its parent company, Think & Learn Pvt. Ltd, in January.
As Byju’s faces financial turbulence, the U.S. bankruptcy case unfolds in the courts of Delaware, highlighting the intricate dynamics between lenders, Alpha Inc., and Byju’s parent company. The company plans to take legal action against a Florida-based hedge fund, accusing it of wrongfully aiding in concealing over $500 million in cash.
With major investors seeking a board reconstitution and change in leadership at an upcoming extraordinary general meeting, the future stability of Byju’s remains uncertain. The embattled ed-tech giant continues to grapple with internal strife, financial woes, and legal battles, leaving the global ed-tech landscape in suspense.
