Byju’s US Units Head for Bankruptcy Sale Under Court Trustee

By Pune Media On Oct 18, 2024 17

(Bloomberg) — Three US education-software companies that bankrupt Indian tech-firm Byju’s bought for $820 million just a few years ago will be put up for sale in order to repay lenders, a court-appointed trustee said.

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It is unclear how much the units are worth and if all three — Neuron Fuel Inc., Epic! Creations Inc. and Tangible Play Inc. — will attract offers, the trustee, Claudia Springer, said in an interview. Byju’s slashed spending at these firms and shipped key functions, including software development, to India before largely abandoning the units in recent months, according to court documents.

“We have had people reach out to us that have expressed interest,” Springer said. “But there is a lot that has to happen” before the companies are ready to put on the auction block.

Any sale would mark the first time creditors succeed in using US courts to collect on what Byju’s owes them. The company defaulted on $1.2 billion owed to US lenders and stymied efforts to recover $533 million in cash that went missing last year.

Meanwhile, lenders are being asked to provide a $9.5 million bankruptcy loan for working capital needs, general corporate purposes and related Chapter 11 costs for the units, said people familiar with the situation. The financing would help stabilize the units ahead of an auction process, said the people, who asked not to be identified discussing a private matter.

A representative for Byju’s did not respond to a request for comment. A spokesperson for the lender group declined to comment.

Last month, creditors convinced a US bankruptcy judge in Wilmington, Delaware to appoint Springer to oversee the three US units of Byju’s.

The companies were wrongly drained of cash in recent months, Springer said in court papers. Several million dollars were taken out of the companies accounts, she said in the interview. She declined to name the people responsible, saying that information would come out in court papers.

Company founder Byju Raveendran has denied wrongdoing, saying his actions were justified in response to overly aggressive tactics used by lenders who specialize in squeezing money out of distressed companies.

The two sides have been fighting in state and federal courts for more than a year about what happened to the $533 million.

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A fourth Byju’s unit, called Byju’s Alpha, is also under court protection. The entity is a shell company with no operations and was used by Byju’s to tap US capital markets.

The case is Epic! Creations, Inc., 24-11161, US Bankruptcy Court, District of Delaware (Wilmington).