The Tutor Byju’s US Arm namely ‘Alpha’ files for bankruptcy after defaulting on debt of $1.2 billion, a day after the edtech company’s key investors initiated moves to oust co-founder and chief executive Byju Raveendran.
Alpha inc. was alleged about helping Byju’s hide more than $500 million in cash.
As per the court documents, Alpha Inc.’s court-appointed CEO Timothy Pohl initiated Chapter 11 insolvency proceedings in a Delaware court stating that the company lacked funds to defend itself against litigation.
Initiation of Chapter 11 for Tutor……
A Chapter 11 petition is typically invoked when a business is unable to meet financial obligations and to avoid multiple litigations.
While Chapter 11 is invoked , a business can continue to run its operations under the control of its owners (the debtor), who now function like managers. They will have to follow rules set by the court, and obtain its permission to make significant financial decisions, including borrowing money to stay alive in the business.
This would give Byju’s some time to halt all the petition made against it in the US & a plan to repay the creditors either by selling off some assets or by raising fresh funds , as per the experts’ thinking.
Earlier this week , Tutor’s parent company Think & Learn Pvt. Ltd approached its investors to raise $200 million at a post-money valuation of $225-250 million after cutting it down from its earlier estimated worth of about $22 billion which seems to be a desperate move made by the parent.
US arm Alpha has listed its assets in the range of $500 million to $1 billion, with estimated creditors numbering in the range of 100 and 199, according to the documents.
Reason for Tutor’s Trouble ……
Tutor’s troubles lies in its aggressive expansion in 2020 and 2021, marked by the acquisitions of 10 companies.
During this period, Byju’s established Alpha in the US as a special purpose vehicle, which received $1.2 billion from lenders in 2021.From which Alpha invested in Camshaft Capital Fund and became a limited partner in it , which was valued at $533 million.
However, problem raised when Byju’s failed to secure WhiteHat Jr, a company it acquired for $300 million, to stand as a guarantor for the $1.2 billion loan due to which main creditors led by Glas trust were displeased.
As a repercussion , Glas Trust seized control of Alpha in March last year, appointing Pohl as the sole director and removing Riju Raveendran, the younger brother of Byju Raveendran, as director & opposing to that decision Byju’s challenged the same in Delaware court, which in November found no wrongdoing in the lenders’ consortium appointing a director to the special purpose vehicle.As a result , Riju Raveendran was subsequently removed from Alpha’s board.
Lenders also filed an insolvency application against its parent company Think & Learn before the Bengaluru bench of the National Company Law Tribunal citing loan defaults , in January.
Follow us on LinkedIn to be updated with the latest news.
