US lenders to Byju’s were removed from an influential creditors committee by a court-appointed arbitrator in India, a potential boon for the struggling online-education company seeking to avert bankruptcy.
The decision by the official, who is overseeing an insolvency case against Byju’s, means that the lenders won’t get a say on who should run the startup and steer a restructuring plan.
The removal is a setback for the lenders, represented by investment firm Glas Trust, and their effort to collect more than $1.2 billion from the troubled startup. Glas Trust has been the most vocal opponent of a settlement agreement Byju’s struck with an Indian creditor – the country’s cricket governing body – to escape insolvency. The investment firm has filed a petition to void the agreement with the cricket body, arguing that it deserves to be paid first – the arbitrator’s decision means technically that the court may allow the settlement to proceed.
The lenders said they didn’t get a chance to vote on who should run Byju’s while a plan to repay creditors is put together. The lenders accused the official – Byju’s Interim Resolution Professional Pankaj Srivastava – of “secretly plotting to reject” their claims and of manipulating the creditor’s vote by excluding them.
Before the US lenders even learned that they had been removed, Srivastava held a meeting of the creditors committee and was selected as a “permanent resolution professional,” the lenders alleged in an emailed statement. Srivastava didn’t respond to an email sent after business hours in India.
“Pankaj Srivastava’s actions are unprecedented and entirely illegitimate as no interim resolution professional in the history of the Insolvency and Bankruptcy Code of India has ever attempted to unlawfully strip financial creditors of claims of this magnitude,” the lenders said.
Lenders have been trying to force Byju’s into an insolvency proceeding in a court in India for months but with limited success. One part of that court fight is now before India’s Supreme Court.
In the US, the lenders have been trying to track down $533 million that Byju’s founder, Byju Raveendran, allegedly said was so well hidden, that no one would ever find it, according to court documents.
Byju’s faces a fraudulent transfer lawsuit in a US bankruptcy court. That case involves Byju’s Alpha, a shell company created by Byju’s in order to tap US capital markets. After Byju’s defaulted, lenders seized control of the shell company, put it under court protection and sued to get $533 million they claim should go to them.
In India, Byju’s had a deal to end the main insolvency case against it, filed by the cricket governing body. The lenders have asked the Supreme Court of India to block that deal, arguing money that should go to them was wrongly being used to pay off the cricket board instead. The court hasn’t yet ruled on that appeal.
