An unexpected children’s company is now going bankrupt in a rare event where creditors file a petition on behalf of the business.
While you may not know the Byju’s name, the company owns a number of popular education brands including Epic, Neuron Fuel and Tangible Play.
However, Epic is no longer under the Byju’s brand as it was taken over by one of the creditors involved in the involuntary Chapter 11 bankruptcy filing in March 2023, reports TheStreet.
“Byju’s is an innovative global edtech leader at the intersection of content, media, and technology,” the company says on its website.
“From our beginnings in one classroom in Bengaluru, India, Byju’s today has grown its presence to 100+ countries across the world.
As the trusted learning partner of 150+ million students, we bring the future of education to the present through technology-enabled, personalized, and engaging learning journeys.”
The company’s lenders and creditors “seek to protect and maximize value of Byju’s U.S.-based operating entities for the benefit of all stakeholders and prevent further diversions of assets and corporate mismanagement,” according to a news release.
Byju’s creditors made the filing after the company had “numerous events of default on the term loan B since November 2022 and defiance of court orders to disclose the location of $533 million in fraudulently transferred loan proceeds from Byju’s Alpha.”
Creditors do not intend to disrupt operations at Epic, Neuron Fuel and Tangible Play.
The involuntary Chapter 11 bankruptcy was filed in U.S. Bankruptcy Court for the District of Delaware by a group of lenders in relation to $1.4 billion in term loans.
The group that initiated the filing includes certain holders of the term loans and Glas Trust Co., as administrative agent and collateral agent of the term loans.
“Since Byju’s began to default on its term loan obligations shortly after we provided Byju’s Alpha with financing in 2021, we have made every effort possible to work productively and collaboratively to help BYJU’s cure its multiple defaults,” the lenders said in a press release.
“However, it is clear that BYJU’s management has no intention or ability to honor its obligations under the term loans.”
The filing parties also made a bold allegation against Byju’s leaders.
“Indeed, Byju’s founders, who also serve as the three directors of the overall enterprise — Byju Raveendran, Riju Ravindran, and Divya Gokulnath — unlawfully diverted $533 million in loan proceeds, the whereabouts of which are still unknown,” the release stated.
The creditors want the affected brands to survive.
“Among other important goals, we have taken this action to protect and preserve the value of Epic, Neuron Fuel, and Tangible Play,” the creditors said.
“We remain committed to their success and stand ready to infuse the capital necessary to reorganize the businesses.”
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An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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