The story starts, as so many seem to, in an inn. But this is not just any inn, but the cleanest, friendliest inn in all of Emon - The Bright Vagabond - owned and operated by a halfling named Tarlan Hillspark. As he prepared to open for the day, a young baker's apprentice named Sliver entered nervously and was gestured to a seat at a large round table marked 'Reserved'. Soon, others gathered; a tall half-elf named Garrick with a symbol of the Raven Queen on his shield, a cheerful gnome named Ashrina dressed in bright colors, and a lanky humanoid called Kid, who wanted nothing more than a fresh cup of bean juice. All had received a mysterious summons from an organization known as The Clasp; though Sliver was concerned about this development, the others all seemed unsurprised to be there.
As they gathered, a woman entered who seemed far too frightened for the bright surroundings and was introduced as Dr. Dannell, who they had been instructed to meet. The group excused themselves upstairs to less spacious, but more private, surroundings - Ashrina's room at the Vagabond. There, the doctor admitted to being terrified of her benefactors, but with no other place to turn for help. A disgraced researcher in antiquities, she recently found a large stone on a dig - an egg, she claims, spawned by an eldrich horror. No one believed her, of course, and the egg was set to go on display at the Natural History Museum tomorrow. With one catch: tonight, it will hatch, and hundreds, if not thousands, would die. Conveniently, there was a gala opening for the exhibit that very evening, and the good doctor managed to procure tickets. She also offered to pay for new outfits so the group will fit in at the party. Not one to let a good deed go unrewarded, Ashrina also gave Dr. Dannell the opportunity to donate her bag of holding to the cause (of Ashrina having a sweet new interdimensional purse).
Spurred on mostly by curiosity and the Clasp's instructions, not to mention the promise of a swanky shopping spree, the group decided they will go ahead and save Emon after all, though they're not all convinced the egg is real. Sliver, for his part, isn't keen on the idea of killing a hatchling, even a freshly hatched eldrich horror. The professor's plan, as described, involved stealing the egg and then imprisoning it in a crystal that she just happens to have in her rooms. This will spare Sliver the moral quandary involved in killing something that has just hatched. He's also quite gratified that he's been summoned to steal something - he thought it was going to be something difficult.
After not deciding on a plan, the group headed for the Erudite Quarter to spend the good professor's hard earned money at Aura, a bespoke clothier. There they were greeted by the owner, the most fabulous kobold to walk the streets of Emon, and the group outfitted themselves with party attire after some haggling and paying a small fortune of someone else's gold for same-day service. All outfitted themselves well, but Sliver outdid himself in a purple jacket and green flared pants, intending to dress himself as a waiter for the gala and save the finery for another day.
On the way, the team decided that they were not going to steal the egg at the gala unless the perfect opportunity presented itself, and so Sliver's hopes of sneaking in as a waiter and walking out with the egg were dashed. After a quick walk around the block to find the museums' entrances and exits, they entered the museum and began admiring the exhibits on the ground floor. Garrick chatted up a bored museum employee in hopes of getting an in with the staff, learning of her side gig as a horror poet, while Kid found the staff entrances remarkably unsecure and Ashrina discovered a janitor exiting a secret room in one of the exhibit halls. Sliver purchased a museum badge from the gift shop, and promptly began bossing around the staff and escorting wealthy-looking patrons upstairs, not really listening to them except to glean information about the exhibit or any valuables on their persons. Tarlan, bemused, stayed behind to keep an eye on Sliver.
Finally, the group headed upstairs to where the exhibit would take place. Garrick headed directly for the privy-rooms to try and find a way to break the wall to get into the exhibit room with the egg. Tarlan examined the Allosaurus exhibit, found a panel, and asked Kid to take a look. Stealthily as can be, Kid opened the panel and found dials and levers, seemingly to control the dinosaur exhibit. Ashrina spotted a conveniently-placed and completely unsecured vent on the exhibit room wall. Not content with merely being extremely useful, she then snuck into the attic and unlocked the museum's skylight while Kid kept watch on...something else entirely.
The party began, with the curator opening the exhibit room and slipping the key into her clutch, which Kid noted she keeps to hand at all times. The group kept watch for signs of any party-goers under the influence of the egg's eldrich occupant, but saw nothing. Kid sidled up to the egg, finding the magical defenses on its pedestal. Garrick concerned himself with the doors, satisfied that the security mechanisms could be blocked with the furniture if need be. While Ashrina ate and drank merrily, Tarlan began speaking with a down-on-her luck noblewoman attending the party to find a suitable suitor. Noting Tarlan's suit from Aura, she seemed newly interested in his company, until Tarlan admitted that he doesn't regularly shop there and that parties makes him nervous. Sliver circulated, serving food and drinks to the patrons he'd scammed earlier and learning that the basement of the museum is full of valuable riches that no one does anything with. Ashrina, having seen the museum curator leave the room upon receiving a mysterious note, snuck after her, confirming both that the curator is a creepy doll enthusiast, and that she keeps the key to her office in her clutch.
At some point during all of this, Sliver left the party and wrote a vaguely threatening note to the curator on a bar napkin, reminding her that she's been warned of the consequences of putting the egg on display. He instructed a server to deliver the note, then removed his jacket and makeup and headed downstairs, away from the aftermath. As requested, the note was delivered, which the rest of the group saw the curator read and crumple up angrily. Tarlan then approached the curator, asking about the stone on display and insinuating that he'd seen something similar in a book. A book about eggs. Angrily refuting this assertion, the curator placed both hands on the stone, and a wave of energy rocked the room. Many party-goers became ill, including Ashrina, who broke out in a sheen and felt dizzy and weak momentarily. The chaos passed quickly, but it was enough for the curator to decide that in fact a gala opening for an eldrich horror was not a good idea and usher everyone out.
Back on the street, the group reassembled to ready themselves for the heist. But before anyone could say anything, Tarlan, staunch cleric of the Dawnfather and firm moral center of the group, held up the clutch he stole from the museum's curator during the commotion, and asked if anyone had forgotten their purse.

Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders (my newsletter Boring Money -- please visit the link if you'd like to subscribe and receive similar posts in your inbox)
--
Four years ago I read an article in The Ken titled The making of a loan crisis at Byju’s. The gist of the story was that Byju’s was an edtech doing phenomenally well selling its digital courses to parents of young students. But these courses were expensive and these parents were poor. So it was also selling them loans to buy these courses. Only, without telling them. Parents would expect a course (which could be cancelled) but would end up with a loan (which couldn’t be cancelled).
Three days ago, Byju’s went to court in New York. Here’s the headline from TechCrunch: Byju’s sues ‘predatory’ lenders on $1.2B term loan, won’t make further payments.
Byju’s is a company that, arguably, made a business out of giving out predatory loans. Now it’s sued its own lenders and accused them of being predatory. I’m not saying that this is poetic justice but.. okay, scratch that. This is poetic justice! If Shakespeare were a finance writer this is the kind of stuff he would come up with.
Everyone wants to lend to Byju’s
In 2021, interest rates were low, loans were cheap. Tech startups were doing great, edtech startups were crushing it. Byju’s, not one to be left behind, had raised a lot of money but money was cheap so it also wanted to borrow. It wanted a $500 million loan from lenders in the US, which it wanted to use to acquire companies there. Instead, it ended up borrowing more than double—$1.2 billion—because lenders practically wanted to throw money at this overachieving edtech startup from India. [1]
The way a term loan such as this works is:

A company goes to an investment bank and asks for a loan
The bank syndicates this loan to investors, who become the lenders. Everyone comes together in a room and negotiates the specifics of the loan (which can be quite complex, as we’ll see)
The loan goes through and everyone’s happy. Presumably, the company likes its lenders, the lenders like the company
The original investors might sell the loans they own to other investors. The company’s only talking to an administrative agent representing the lenders, so over time it might not even know who its lenders are

In November 2021, prominent investment managers such as Blackstone, Fidelity and GIC had gone overboard to lend money to Byju’s. By September 2022, Byju’s lenders were desperately selling [2] their loans at a 36% discount on the principal. (Today, Byju’s debt is at a 20% discount, which is also bad.)
It’s likely that Blackstone, Fidelity and other of the OG lenders aren’t Byju’s’ lenders any more. They’ve almost certainly sold off their loans at a loss. Better get paid something than get paid nothing.
Dealers of the dead
If a company’s debt is being sold at a 36% discount, it’s because investors think that the company is unlikely to repay its loans. If you buy such a loan, you potentially stand to gain a lot—because of the discount—but well, you might also just lose everything.
If you’re a regular investment management company, like Blackstone, you don’t want to invest in such a loan. Your investors gave you this money to get predictable returns. If they wanted risk, they’d ask you to buy stocks. You don’t want to get into a fight with your borrower. If you feel they will not pay you back, you take a loss, sell the loans, move on.
If you’re a distressed debt investor, your entire business is to buy such distressed loans from regular investment managers like Blackstone. You’re going to get nasty borrowers who are unlikely to want to repay their loans but that’s okay. Because you’re nasty too. You spend less time on financial models, more in courts and around lawyers. You like to fight to get your money back. Sometimes you might lose, but the times you win, you win big. The wins cover your losses and some more.
Blackstone and the others sold Byju’s’ loans in desperation, and they were almost certainly bought by distressed debt investors. We don’t know who they are exactly, but Byju’s has indicated that one of them is Redwood Capital, a New York-based distressed debt investor.
If you’re a distressed debt investor, this is how it works:

You get a loan for super cheap
If the company repays its loan, great! You make a lot of money
But the company isn’t likely to repay, which is why you got the loan for cheap in the first place
So it’s in your best interest to not let the company die a slow death. Instead, you want to kill the company quick. You take the company to court ASAP and take all the money you’re owed while it’s still there

If the new investors waited, say, for a year, and took Byju’s to court after it had actually defaulted on its repayments—there might not be any money left! Byju’s may have given all the money to Lionel Messi or maybe laundered it away someplace the lenders wouldn’t find it. If you’re a distressed debt investor, you want to get Byju’s to court and get the court to force it to do whatever it takes to pay you back.
Last month, Byju’s’ new lenders sued Byju’s in the Delaware Court of Chancery [3]. We’ll get to the official reasons for this lawsuit in a bit, but what’s important is that Byju’s was not being sued because it defaulted on a payment. It hadn’t. It was being sued because the distressed debt investors expect it to default sooner or later, and they would prefer dealing with it sooner rather than later.
Lenders go for the kill
Usually, the finer details of corporate loans such as Byju’s’ aren’t public. But thanks to the multiple lawsuits we know quite a bit here.
The loan was made to Byju’s’ US entity and it was secured with guarantees from multiple Byju’s companies. From Byju’s’ lawsuit this week against its creditors (which I will get to), here are the guarantors:

Byju’s entities in India and Singapore
Byju’s’ US and Singapore acquisitions; companies including Oros, Epic, Great Learning, and Neuron
Whitehat India, Byju’s’ famous Indian acquisition

That’s a lot of companies guaranteeing a loan! Byju’s’ Indian entity is the parent of all the other guarantor companies, so having it as a guarantor should’ve been enough. I guess the rationale here was that it would be nice to have some non-Indian companies in the mix too, we do know how efficiently Indian courts work.
Apart from Byju’s the parent company itself, Whitehat was the only other Indian company guaranteeing this loan. The problem was that Whitehat itself, on paper, had negative net worth. It had probably taken loans of its own and did not have enough assets to cover them. In practice, this would be irrelevant, because Whitehat was owned by Byju’s and it would cover any of Whitehat’s liabilities. But, apparently, RBI regulations require Indian companies with negative net worth to take its approval before guaranteeing a loan. So even though Whitehat was a guarantor, the guarantee was meaningless until RBI granted its approval.
Yeah, well, RBI didn’t grant its approval. From the lawsuit:

Plaintiffs, Borrower, and Lenders had a call on or around October 6, 2022, to discuss the Whitehat Guarantee. In a good faith effort to negate any impact of the new regulations, Plaintiffs and the Borrower offered to move all assets out of Whitehat India into other subsidiaries of the Parent Guarantor that are Guarantors to the Credit Agreement, or are owned by Guarantors of the Credit Agreement. Lenders rejected this proposal without justification.

In October 2022, after Byju’s’ debt was already sold to the distressed debt investors, the company spoke to its lenders and informed them that it was unable to get RBI’s approval for Whitehat to be a guarantor. Instead, it offered to move Whitehat’s assets into other companies and then use those companies to guarantee the loan. Which would really have been the same thing. But the lenders refused! Why?!
Continuing from the lawsuit:

Lenders subsequently asserted that an event of default under Section 8.1(e) of the Credit Agreement (an “Event of Default”) had occurred due to the failure to procure the Whitehat Guarantee.

Oh, that’s why. Byju’s’ lenders—distressed debt investors that wanted Byju’s dead ASAP—used the fact that Whitehat couldn’t be a guarantor of this loan to claim a default and use it as a reason to take Byju’s to court in the US. Honestly, I’m impressed. The Whitehat guarantee was redundant to begin with, but the lenders had found an out and their official reason #1 to take Byju’s to court.
Oh, there’s another thing. In June 2022, The Ken reported that Byju’s’ financials for 2021 had been held up by its auditors because of certain, umm, creative accounting. By this time, Byju’s should have ideally filed even its 2022 financials. It was very late! From the lawsuit:

The FY’21 Audit was delivered to the Lenders on August 30, 2022. It did not contain a “going concern” qualification or any similar qualifications about the Parent Guarantor’s ability to continue into the future. However, the FY’22 Audit could not begin until the FY’21 Audit had been completed, and the Parent Guarantor’s business has continued to grow rapidly

Byju’s’ 2021 financials were held up because auditors weren’t giving the company their go ahead, so of course its 2022 financials were held up as well.

On or around August 29, 2022, Shearman & Sterling, LLP (“S&S”), counsel for GLAS, sent a letter to Byju’s Alpha and Think & Learn requesting certain financial disclosures from Plaintiffs and Borrower, and asserting that the failure to deliver this financial information was a breach of the Credit Agreement. ... Rather than actually suffering any damage from the delayed FY’22 audit, Lenders opportunistically used this unintentional and non-material delay to exert pressure on Plaintiffs and the Borrower to extract onerous economic concessions.

I love it! Byju’s’ financials were delayed. Its agreement with the original lenders said that the company must share its audited financials with them. Byju’s wasn’t able to do that. The lenders found their official reason #2 to take Byju’s to court.
Byju’s sets up an offence
Before the lenders sued Byju’s last month, Byju’s tried its best to negotiate a deal. It gave the lenders an assurance of the company’s financial health, gave them concessions worth “tens of millions of dollars” and requested (pleaded) to take back their claims of Byju’s defaulting.
The lenders refused. They asked for either the full principal back or two-thirds of it, with an increment of 7% (!!) in the interest rate. Byju’s, of course, said no.
At this point, Byju’s knew that the lenders weren’t going to negotiate realistically. So it prepared its own offence. From the lawsuit:

The Credit Agreement prohibits transfers or assignments of the Lenders’ interests in the Term Loans to “Disqualified Lenders.” The Credit Agreement includes in its definition of Disqualified Lender “[a]ny [] Person (including an Affiliate or Approved Fund of a Lender) whose primary activity is the trading or acquisition of distressed debt,” and “those banks, financial institutions and other Persons separately identified by name . . . on or before the syndication . . . (which may be updated . . . from time to time . . .)”

In its agreement with the original lenders, Byju’s had put in a clause restricting its loan from being transferred to distressed debt investors. This is a risky clause to agree with, because it’s only these folks that buy loans that turn sour, but the original lenders had gone with it.

On information and belief, the entire course of Lenders’, and Defendant’s, bad-faith conduct has been driven by these distressed-debt lenders, who were never meant to have been lenders in the first place, and who acted with the intent of causing harm to Borrower and Plaintiffs. Meanwhile, Borrowers and Plaintiffs were initially unaware that the lenders were in fact being controlled by distressed debt dealers, and were therefore unable to take action to prevent their bad-faith plan from being implemented.

In its lawsuit this week, the crux of Byju’s’ argument is based on the fact that its loan is owned by distressed debt investors who were not eligible to be owning its debt in the first place. Also interesting is that Byju’s doesn’t seem to know who these lenders are. In its post-lawsuit statement, Byju’s named Redwood as one of the lenders, but it’s not named anywhere in the lawsuit.
Now what?
If push comes to shove, does Byju’s have the cash to pay off its lenders?
Last month, Byju’s transferred $500 million out of its US entity. The lenders had filed their lawsuit and there was a chance the court would freeze Byju’s’ US entity’s assets, so this was a precautionary move. So Byju’s has this $500 million. But that seems about it. Byju’s has been in the news saying that it’s trying to raise $700 million to pay off its debt. Yeah, between the horrible edtech market and the colourful lawsuits Byju’s is in, good luck with getting investors to donate their money to Byju’s.
But of course, Byju’s is now suing its lenders too. It does have an agreement that says that its debt can’t be held by distressed debt investors. So it’s not a frivolous suit.
Can Byju’s win? Sure. It would still have to pay its debt eventually. And it’s not straightforward. There are probably tens or even hundreds of lenders. It’s apparent that the distressed debt investors are the guiding force behind the lenders’ lawsuit, but it’s definitely not necessary that they form the majority of the lenders. In which case, Byju’s’ whole lawsuit falls apart.
The lenders are saying Byju’s defaulted by not keeping its part of the agreement, even though it had technically paid its dues. [4] Byju’s is saying that the lenders shouldn’t be the lenders in the first place and must be disqualified. We’ll see who’s right.
Footnotes
[1] It was a 5-year loan with a floating interest rate of 6% over Libor. Think of it as 6% over this magical interest-rate called Libor that some fancy-pants banks set amongst themselves everyday. Back in November 2021, Libor was at 0.25% and this was a 6.86% interest loan for Byju’s (the floor for Libor was 0.75%). Today, Libor is at about 5.64% and it’s an 11.6% loan.
[2] Multiple reasons for the investors to sell. One, interest rates went up and cash became more dear. If they had money stuck with Byju’s, it was money not being lent out to someone else. Second, edtech all around the world was in trouble. Kids were back in school and people didn’t think much of them anymore. Third, Byju’s as a company was showing its red flags.
[3] What a cool name!
[4] Until now, that is. Byju’s filed its lawsuit this week the same day it was supposed to make a $40 million interest payment.
Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders

Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders (my newsletter Boring Money -- please visit the link if you'd like to subscribe and receive similar posts in your inbox)
--
Four years ago I read an article in The Ken titled The making of a loan crisis at Byju’s. The gist of the story was that Byju’s was an edtech doing phenomenally well selling its digital courses to parents of young students. But these courses were expensive and these parents were poor. So it was also selling them loans to buy these courses. Only, without telling them. Parents would expect a course (which could be cancelled) but would end up with a loan (which couldn’t be cancelled).
Three days ago, Byju’s went to court in New York. Here’s the headline from TechCrunch: Byju’s sues ‘predatory’ lenders on $1.2B term loan, won’t make further payments.
Byju’s is a company that, arguably, made a business out of giving out predatory loans. Now it’s sued its own lenders and accused them of being predatory. I’m not saying that this is poetic justice but.. okay, scratch that. This is poetic justice! If Shakespeare were a finance writer this is the kind of stuff he would come up with.
Everyone wants to lend to Byju’s
In 2021, interest rates were low, loans were cheap. Tech startups were doing great, edtech startups were crushing it. Byju’s, not one to be left behind, had raised a lot of money but money was cheap so it also wanted to borrow. It wanted a $500 million loan from lenders in the US, which it wanted to use to acquire companies there. Instead, it ended up borrowing more than double—$1.2 billion—because lenders practically wanted to throw money at this overachieving edtech startup from India. [1]
The way a term loan such as this works is:

A company goes to an investment bank and asks for a loan
The bank syndicates this loan to investors, who become the lenders. Everyone comes together in a room and negotiates the specifics of the loan (which can be quite complex, as we’ll see)
The loan goes through and everyone’s happy. Presumably, the company likes its lenders, the lenders like the company
The original investors might sell the loans they own to other investors. The company’s only talking to an administrative agent representing the lenders, so over time it might not even know who its lenders are

In November 2021, prominent investment managers such as Blackstone, Fidelity and GIC had gone overboard to lend money to Byju’s. By September 2022, Byju’s lenders were desperately selling [2] their loans at a 36% discount on the principal. (Today, Byju’s debt is at a 20% discount, which is also bad.)
It’s likely that Blackstone, Fidelity and other of the OG lenders aren’t Byju’s’ lenders any more. They’ve almost certainly sold off their loans at a loss. Better get paid something than get paid nothing.
Dealers of the dead
If a company’s debt is being sold at a 36% discount, it’s because investors think that the company is unlikely to repay its loans. If you buy such a loan, you potentially stand to gain a lot—because of the discount—but well, you might also just lose everything.
If you’re a regular investment management company, like Blackstone, you don’t want to invest in such a loan. Your investors gave you this money to get predictable returns. If they wanted risk, they’d ask you to buy stocks. You don’t want to get into a fight with your borrower. If you feel they will not pay you back, you take a loss, sell the loans, move on.
If you’re a distressed debt investor, your entire business is to buy such distressed loans from regular investment managers like Blackstone. You’re going to get nasty borrowers who are unlikely to want to repay their loans but that’s okay. Because you’re nasty too. You spend less time on financial models, more in courts and around lawyers. You like to fight to get your money back. Sometimes you might lose, but the times you win, you win big. The wins cover your losses and some more.
Blackstone and the others sold Byju’s’ loans in desperation, and they were almost certainly bought by distressed debt investors. We don’t know who they are exactly, but Byju’s has indicated that one of them is Redwood Capital, a New York-based distressed debt investor.
If you’re a distressed debt investor, this is how it works:

You get a loan for super cheap
If the company repays its loan, great! You make a lot of money
But the company isn’t likely to repay, which is why you got the loan for cheap in the first place
So it’s in your best interest to not let the company die a slow death. Instead, you want to kill the company quick. You take the company to court ASAP and take all the money you’re owed while it’s still there

If the new investors waited, say, for a year, and took Byju’s to court after it had actually defaulted on its repayments—there might not be any money left! Byju’s may have given all the money to Lionel Messi or maybe laundered it away someplace the lenders wouldn’t find it. If you’re a distressed debt investor, you want to get Byju’s to court and get the court to force it to do whatever it takes to pay you back.
Last month, Byju’s’ new lenders sued Byju’s in the Delaware Court of Chancery [3]. We’ll get to the official reasons for this lawsuit in a bit, but what’s important is that Byju’s was not being sued because it defaulted on a payment. It hadn’t. It was being sued because the distressed debt investors expect it to default sooner or later, and they would prefer dealing with it sooner rather than later.
Lenders go for the kill
Usually, the finer details of corporate loans such as Byju’s’ aren’t public. But thanks to the multiple lawsuits we know quite a bit here.
The loan was made to Byju’s’ US entity and it was secured with guarantees from multiple Byju’s companies. From Byju’s’ lawsuit this week against its creditors (which I will get to), here are the guarantors:

Byju’s entities in India and Singapore
Byju’s’ US and Singapore acquisitions; companies including Oros, Epic, Great Learning, and Neuron
Whitehat India, Byju’s’ famous Indian acquisition

That’s a lot of companies guaranteeing a loan! Byju’s’ Indian entity is the parent of all the other guarantor companies, so having it as a guarantor should’ve been enough. I guess the rationale here was that it would be nice to have some non-Indian companies in the mix too, we do know how efficiently Indian courts work.
Apart from Byju’s the parent company itself, Whitehat was the only other Indian company guaranteeing this loan. The problem was that Whitehat itself, on paper, had negative net worth. It had probably taken loans of its own and did not have enough assets to cover them. In practice, this would be irrelevant, because Whitehat was owned by Byju’s and it would cover any of Whitehat’s liabilities. But, apparently, RBI regulations require Indian companies with negative net worth to take its approval before guaranteeing a loan. So even though Whitehat was a guarantor, the guarantee was meaningless until RBI granted its approval.
Yeah, well, RBI didn’t grant its approval. From the lawsuit:

Plaintiffs, Borrower, and Lenders had a call on or around October 6, 2022, to discuss the Whitehat Guarantee. In a good faith effort to negate any impact of the new regulations, Plaintiffs and the Borrower offered to move all assets out of Whitehat India into other subsidiaries of the Parent Guarantor that are Guarantors to the Credit Agreement, or are owned by Guarantors of the Credit Agreement. Lenders rejected this proposal without justification.

In October 2022, after Byju’s’ debt was already sold to the distressed debt investors, the company spoke to its lenders and informed them that it was unable to get RBI’s approval for Whitehat to be a guarantor. Instead, it offered to move Whitehat’s assets into other companies and then use those companies to guarantee the loan. Which would really have been the same thing. But the lenders refused! Why?!
Continuing from the lawsuit:

Lenders subsequently asserted that an event of default under Section 8.1(e) of the Credit Agreement (an “Event of Default”) had occurred due to the failure to procure the Whitehat Guarantee.

Oh, that’s why. Byju’s’ lenders—distressed debt investors that wanted Byju’s dead ASAP—used the fact that Whitehat couldn’t be a guarantor of this loan to claim a default and use it as a reason to take Byju’s to court in the US. Honestly, I’m impressed. The Whitehat guarantee was redundant to begin with, but the lenders had found an out and their official reason #1 to take Byju’s to court.
Oh, there’s another thing. In June 2022, The Ken reported that Byju’s’ financials for 2021 had been held up by its auditors because of certain, umm, creative accounting. By this time, Byju’s should have ideally filed even its 2022 financials. It was very late! From the lawsuit:

The FY’21 Audit was delivered to the Lenders on August 30, 2022. It did not contain a “going concern” qualification or any similar qualifications about the Parent Guarantor’s ability to continue into the future. However, the FY’22 Audit could not begin until the FY’21 Audit had been completed, and the Parent Guarantor’s business has continued to grow rapidly

Byju’s’ 2021 financials were held up because auditors weren’t giving the company their go ahead, so of course its 2022 financials were held up as well.

On or around August 29, 2022, Shearman & Sterling, LLP (“S&S”), counsel for GLAS, sent a letter to Byju’s Alpha and Think & Learn requesting certain financial disclosures from Plaintiffs and Borrower, and asserting that the failure to deliver this financial information was a breach of the Credit Agreement. ... Rather than actually suffering any damage from the delayed FY’22 audit, Lenders opportunistically used this unintentional and non-material delay to exert pressure on Plaintiffs and the Borrower to extract onerous economic concessions.

I love it! Byju’s’ financials were delayed. Its agreement with the original lenders said that the company must share its audited financials with them. Byju’s wasn’t able to do that. The lenders found their official reason #2 to take Byju’s to court.
Byju’s sets up an offence
Before the lenders sued Byju’s last month, Byju’s tried its best to negotiate a deal. It gave the lenders an assurance of the company’s financial health, gave them concessions worth “tens of millions of dollars” and requested (pleaded) to take back their claims of Byju’s defaulting.
The lenders refused. They asked for either the full principal back or two-thirds of it, with an increment of 7% (!!) in the interest rate. Byju’s, of course, said no.
At this point, Byju’s knew that the lenders weren’t going to negotiate realistically. So it prepared its own offence. From the lawsuit:

The Credit Agreement prohibits transfers or assignments of the Lenders’ interests in the Term Loans to “Disqualified Lenders.” The Credit Agreement includes in its definition of Disqualified Lender “[a]ny [] Person (including an Affiliate or Approved Fund of a Lender) whose primary activity is the trading or acquisition of distressed debt,” and “those banks, financial institutions and other Persons separately identified by name . . . on or before the syndication . . . (which may be updated . . . from time to time . . .)”

In its agreement with the original lenders, Byju’s had put in a clause restricting its loan from being transferred to distressed debt investors. This is a risky clause to agree with, because it’s only these folks that buy loans that turn sour, but the original lenders had gone with it.

On information and belief, the entire course of Lenders’, and Defendant’s, bad-faith conduct has been driven by these distressed-debt lenders, who were never meant to have been lenders in the first place, and who acted with the intent of causing harm to Borrower and Plaintiffs. Meanwhile, Borrowers and Plaintiffs were initially unaware that the lenders were in fact being controlled by distressed debt dealers, and were therefore unable to take action to prevent their bad-faith plan from being implemented.

In its lawsuit this week, the crux of Byju’s’ argument is based on the fact that its loan is owned by distressed debt investors who were not eligible to be owning its debt in the first place. Also interesting is that Byju’s doesn’t seem to know who these lenders are. In its post-lawsuit statement, Byju’s named Redwood as one of the lenders, but it’s not named anywhere in the lawsuit.
Now what?
If push comes to shove, does Byju’s have the cash to pay off its lenders?
Last month, Byju’s transferred $500 million out of its US entity. The lenders had filed their lawsuit and there was a chance the court would freeze Byju’s’ US entity’s assets, so this was a precautionary move. So Byju’s has this $500 million. But that seems about it. Byju’s has been in the news saying that it’s trying to raise $700 million to pay off its debt. Yeah, between the horrible edtech market and the colourful lawsuits Byju’s is in, good luck with getting investors to donate their money to Byju’s.
But of course, Byju’s is now suing its lenders too. It does have an agreement that says that its debt can’t be held by distressed debt investors. So it’s not a frivolous suit.
Can Byju’s win? Sure. It would still have to pay its debt eventually. And it’s not straightforward. There are probably tens or even hundreds of lenders. It’s apparent that the distressed debt investors are the guiding force behind the lenders’ lawsuit, but it’s definitely not necessary that they form the majority of the lenders. In which case, Byju’s’ whole lawsuit falls apart.
The lenders are saying Byju’s defaulted by not keeping its part of the agreement, even though it had technically paid its dues. [4] Byju’s is saying that the lenders shouldn’t be the lenders in the first place and must be disqualified. We’ll see who’s right.
Footnotes
[1] It was a 5-year loan with a floating interest rate of 6% over Libor. Think of it as 6% over this magical interest-rate called Libor that some fancy-pants banks set amongst themselves everyday. Back in November 2021, Libor was at 0.25% and this was a 6.86% interest loan for Byju’s (the floor for Libor was 0.75%). Today, Libor is at about 5.64% and it’s an 11.6% loan.
[2] Multiple reasons for the investors to sell. One, interest rates went up and cash became more dear. If they had money stuck with Byju’s, it was money not being lent out to someone else. Second, edtech all around the world was in trouble. Kids were back in school and people didn’t think much of them anymore. Third, Byju’s as a company was showing its red flags.
[3] What a cool name!
[4] Until now, that is. Byju’s filed its lawsuit this week the same day it was supposed to make a $40 million interest payment.
Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders

Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders (my newsletter Boring Money -- please visit the link if you'd like to subscribe and receive similar posts in your inbox)
--
Four years ago I read an article in The Ken titled The making of a loan crisis at Byju’s. The gist of the story was that Byju’s was an edtech doing phenomenally well selling its digital courses to parents of young students. But these courses were expensive and these parents were poor. So it was also selling them loans to buy these courses. Only, without telling them. Parents would expect a course (which could be cancelled) but would end up with a loan (which couldn’t be cancelled).
Three days ago, Byju’s went to court in New York. Here’s the headline from TechCrunch: Byju’s sues ‘predatory’ lenders on $1.2B term loan, won’t make further payments.
Byju’s is a company that, arguably, made a business out of giving out predatory loans. Now it’s sued its own lenders and accused them of being predatory. I’m not saying that this is poetic justice but.. okay, scratch that. This is poetic justice! If Shakespeare were a finance writer this is the kind of stuff he would come up with.
Everyone wants to lend to Byju’s
In 2021, interest rates were low, loans were cheap. Tech startups were doing great, edtech startups were crushing it. Byju’s, not one to be left behind, had raised a lot of money but money was cheap so it also wanted to borrow. It wanted a $500 million loan from lenders in the US, which it wanted to use to acquire companies there. Instead, it ended up borrowing more than double—$1.2 billion—because lenders practically wanted to throw money at this overachieving edtech startup from India. [1]
The way a term loan such as this works is:

A company goes to an investment bank and asks for a loan
The bank syndicates this loan to investors, who become the lenders. Everyone comes together in a room and negotiates the specifics of the loan (which can be quite complex, as we’ll see)
The loan goes through and everyone’s happy. Presumably, the company likes its lenders, the lenders like the company
The original investors might sell the loans they own to other investors. The company’s only talking to an administrative agent representing the lenders, so over time it might not even know who its lenders are

In November 2021, prominent investment managers such as Blackstone, Fidelity and GIC had gone overboard to lend money to Byju’s. By September 2022, Byju’s lenders were desperately selling [2] their loans at a 36% discount on the principal. (Today, Byju’s debt is at a 20% discount, which is also bad.)
It’s likely that Blackstone, Fidelity and other of the OG lenders aren’t Byju’s’ lenders any more. They’ve almost certainly sold off their loans at a loss. Better get paid something than get paid nothing.
Dealers of the dead
If a company’s debt is being sold at a 36% discount, it’s because investors think that the company is unlikely to repay its loans. If you buy such a loan, you potentially stand to gain a lot—because of the discount—but well, you might also just lose everything.
If you’re a regular investment management company, like Blackstone, you don’t want to invest in such a loan. Your investors gave you this money to get predictable returns. If they wanted risk, they’d ask you to buy stocks. You don’t want to get into a fight with your borrower. If you feel they will not pay you back, you take a loss, sell the loans, move on.
If you’re a distressed debt investor, your entire business is to buy such distressed loans from regular investment managers like Blackstone. You’re going to get nasty borrowers who are unlikely to want to repay their loans but that’s okay. Because you’re nasty too. You spend less time on financial models, more in courts and around lawyers. You like to fight to get your money back. Sometimes you might lose, but the times you win, you win big. The wins cover your losses and some more.
Blackstone and the others sold Byju’s’ loans in desperation, and they were almost certainly bought by distressed debt investors. We don’t know who they are exactly, but Byju’s has indicated that one of them is Redwood Capital, a New York-based distressed debt investor.
If you’re a distressed debt investor, this is how it works:

You get a loan for super cheap
If the company repays its loan, great! You make a lot of money
But the company isn’t likely to repay, which is why you got the loan for cheap in the first place
So it’s in your best interest to not let the company die a slow death. Instead, you want to kill the company quick. You take the company to court ASAP and take all the money you’re owed while it’s still there

If the new investors waited, say, for a year, and took Byju’s to court after it had actually defaulted on its repayments—there might not be any money left! Byju’s may have given all the money to Lionel Messi or maybe laundered it away someplace the lenders wouldn’t find it. If you’re a distressed debt investor, you want to get Byju’s to court and get the court to force it to do whatever it takes to pay you back.
Last month, Byju’s’ new lenders sued Byju’s in the Delaware Court of Chancery [3]. We’ll get to the official reasons for this lawsuit in a bit, but what’s important is that Byju’s was not being sued because it defaulted on a payment. It hadn’t. It was being sued because the distressed debt investors expect it to default sooner or later, and they would prefer dealing with it sooner rather than later.
Lenders go for the kill
Usually, the finer details of corporate loans such as Byju’s’ aren’t public. But thanks to the multiple lawsuits we know quite a bit here.
The loan was made to Byju’s’ US entity and it was secured with guarantees from multiple Byju’s companies. From Byju’s’ lawsuit this week against its creditors (which I will get to), here are the guarantors:

Byju’s entities in India and Singapore
Byju’s’ US and Singapore acquisitions; companies including Oros, Epic, Great Learning, and Neuron
Whitehat India, Byju’s’ famous Indian acquisition

That’s a lot of companies guaranteeing a loan! Byju’s’ Indian entity is the parent of all the other guarantor companies, so having it as a guarantor should’ve been enough. I guess the rationale here was that it would be nice to have some non-Indian companies in the mix too, we do know how efficiently Indian courts work.
Apart from Byju’s the parent company itself, Whitehat was the only other Indian company guaranteeing this loan. The problem was that Whitehat itself, on paper, had negative net worth. It had probably taken loans of its own and did not have enough assets to cover them. In practice, this would be irrelevant, because Whitehat was owned by Byju’s and it would cover any of Whitehat’s liabilities. But, apparently, RBI regulations require Indian companies with negative net worth to take its approval before guaranteeing a loan. So even though Whitehat was a guarantor, the guarantee was meaningless until RBI granted its approval.
Yeah, well, RBI didn’t grant its approval. From the lawsuit:

Plaintiffs, Borrower, and Lenders had a call on or around October 6, 2022, to discuss the Whitehat Guarantee. In a good faith effort to negate any impact of the new regulations, Plaintiffs and the Borrower offered to move all assets out of Whitehat India into other subsidiaries of the Parent Guarantor that are Guarantors to the Credit Agreement, or are owned by Guarantors of the Credit Agreement. Lenders rejected this proposal without justification.

In October 2022, after Byju’s’ debt was already sold to the distressed debt investors, the company spoke to its lenders and informed them that it was unable to get RBI’s approval for Whitehat to be a guarantor. Instead, it offered to move Whitehat’s assets into other companies and then use those companies to guarantee the loan. Which would really have been the same thing. But the lenders refused! Why?!
Continuing from the lawsuit:

Lenders subsequently asserted that an event of default under Section 8.1(e) of the Credit Agreement (an “Event of Default”) had occurred due to the failure to procure the Whitehat Guarantee.

Oh, that’s why. Byju’s’ lenders—distressed debt investors that wanted Byju’s dead ASAP—used the fact that Whitehat couldn’t be a guarantor of this loan to claim a default and use it as a reason to take Byju’s to court in the US. Honestly, I’m impressed. The Whitehat guarantee was redundant to begin with, but the lenders had found an out and their official reason #1 to take Byju’s to court.
Oh, there’s another thing. In June 2022, The Ken reported that Byju’s’ financials for 2021 had been held up by its auditors because of certain, umm, creative accounting. By this time, Byju’s should have ideally filed even its 2022 financials. It was very late! From the lawsuit:

The FY’21 Audit was delivered to the Lenders on August 30, 2022. It did not contain a “going concern” qualification or any similar qualifications about the Parent Guarantor’s ability to continue into the future. However, the FY’22 Audit could not begin until the FY’21 Audit had been completed, and the Parent Guarantor’s business has continued to grow rapidly

Byju’s’ 2021 financials were held up because auditors weren’t giving the company their go ahead, so of course its 2022 financials were held up as well.

On or around August 29, 2022, Shearman & Sterling, LLP (“S&S”), counsel for GLAS, sent a letter to Byju’s Alpha and Think & Learn requesting certain financial disclosures from Plaintiffs and Borrower, and asserting that the failure to deliver this financial information was a breach of the Credit Agreement. ... Rather than actually suffering any damage from the delayed FY’22 audit, Lenders opportunistically used this unintentional and non-material delay to exert pressure on Plaintiffs and the Borrower to extract onerous economic concessions.

I love it! Byju’s’ financials were delayed. Its agreement with the original lenders said that the company must share its audited financials with them. Byju’s wasn’t able to do that. The lenders found their official reason #2 to take Byju’s to court.
Byju’s sets up an offence
Before the lenders sued Byju’s last month, Byju’s tried its best to negotiate a deal. It gave the lenders an assurance of the company’s financial health, gave them concessions worth “tens of millions of dollars” and requested (pleaded) to take back their claims of Byju’s defaulting.
The lenders refused. They asked for either the full principal back or two-thirds of it, with an increment of 7% (!!) in the interest rate. Byju’s, of course, said no.
At this point, Byju’s knew that the lenders weren’t going to negotiate realistically. So it prepared its own offence. From the lawsuit:

The Credit Agreement prohibits transfers or assignments of the Lenders’ interests in the Term Loans to “Disqualified Lenders.” The Credit Agreement includes in its definition of Disqualified Lender “[a]ny [] Person (including an Affiliate or Approved Fund of a Lender) whose primary activity is the trading or acquisition of distressed debt,” and “those banks, financial institutions and other Persons separately identified by name . . . on or before the syndication . . . (which may be updated . . . from time to time . . .)”

In its agreement with the original lenders, Byju’s had put in a clause restricting its loan from being transferred to distressed debt investors. This is a risky clause to agree with, because it’s only these folks that buy loans that turn sour, but the original lenders had gone with it.

On information and belief, the entire course of Lenders’, and Defendant’s, bad-faith conduct has been driven by these distressed-debt lenders, who were never meant to have been lenders in the first place, and who acted with the intent of causing harm to Borrower and Plaintiffs. Meanwhile, Borrowers and Plaintiffs were initially unaware that the lenders were in fact being controlled by distressed debt dealers, and were therefore unable to take action to prevent their bad-faith plan from being implemented.

In its lawsuit this week, the crux of Byju’s’ argument is based on the fact that its loan is owned by distressed debt investors who were not eligible to be owning its debt in the first place. Also interesting is that Byju’s doesn’t seem to know who these lenders are. In its post-lawsuit statement, Byju’s named Redwood as one of the lenders, but it’s not named anywhere in the lawsuit.
Now what?
If push comes to shove, does Byju’s have the cash to pay off its lenders?
Last month, Byju’s transferred $500 million out of its US entity. The lenders had filed their lawsuit and there was a chance the court would freeze Byju’s’ US entity’s assets, so this was a precautionary move. So Byju’s has this $500 million. But that seems about it. Byju’s has been in the news saying that it’s trying to raise $700 million to pay off its debt. Yeah, between the horrible edtech market and the colourful lawsuits Byju’s is in, good luck with getting investors to donate their money to Byju’s.
But of course, Byju’s is now suing its lenders too. It does have an agreement that says that its debt can’t be held by distressed debt investors. So it’s not a frivolous suit.
Can Byju’s win? Sure. It would still have to pay its debt eventually. And it’s not straightforward. There are probably tens or even hundreds of lenders. It’s apparent that the distressed debt investors are the guiding force behind the lenders’ lawsuit, but it’s definitely not necessary that they form the majority of the lenders. In which case, Byju’s’ whole lawsuit falls apart.
The lenders are saying Byju’s defaulted by not keeping its part of the agreement, even though it had technically paid its dues. [4] Byju’s is saying that the lenders shouldn’t be the lenders in the first place and must be disqualified. We’ll see who’s right.
Footnotes
[1] It was a 5-year loan with a floating interest rate of 6% over Libor. Think of it as 6% over this magical interest-rate called Libor that some fancy-pants banks set amongst themselves everyday. Back in November 2021, Libor was at 0.25% and this was a 6.86% interest loan for Byju’s (the floor for Libor was 0.75%). Today, Libor is at about 5.64% and it’s an 11.6% loan.
[2] Multiple reasons for the investors to sell. One, interest rates went up and cash became more dear. If they had money stuck with Byju’s, it was money not being lent out to someone else. Second, edtech all around the world was in trouble. Kids were back in school and people didn’t think much of them anymore. Third, Byju’s as a company was showing its red flags.
[3] What a cool name!
[4] Until now, that is. Byju’s filed its lawsuit this week the same day it was supposed to make a $40 million interest payment.
Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders

Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders (my newsletter Boring Money -- please visit the link if you'd like to subscribe and receive similar posts in your inbox)
--
Four years ago I read an article in The Ken titled The making of a loan crisis at Byju’s. The gist of the story was that Byju’s was an edtech doing phenomenally well selling its digital courses to parents of young students. But these courses were expensive and these parents were poor. So it was also selling them loans to buy these courses. Only, without telling them. Parents would expect a course (which could be cancelled) but would end up with a loan (which couldn’t be cancelled).
Three days ago, Byju’s went to court in New York. Here’s the headline from TechCrunch: Byju’s sues ‘predatory’ lenders on $1.2B term loan, won’t make further payments.
Byju’s is a company that, arguably, made a business out of giving out predatory loans. Now it’s sued its own lenders and accused them of being predatory. I’m not saying that this is poetic justice but.. okay, scratch that. This is poetic justice! If Shakespeare were a finance writer this is the kind of stuff he would come up with.
Everyone wants to lend to Byju’s
In 2021, interest rates were low, loans were cheap. Tech startups were doing great, edtech startups were crushing it. Byju’s, not one to be left behind, had raised a lot of money but money was cheap so it also wanted to borrow. It wanted a $500 million loan from lenders in the US, which it wanted to use to acquire companies there. Instead, it ended up borrowing more than double—$1.2 billion—because lenders practically wanted to throw money at this overachieving edtech startup from India. [1]
The way a term loan such as this works is:

A company goes to an investment bank and asks for a loan
The bank syndicates this loan to investors, who become the lenders. Everyone comes together in a room and negotiates the specifics of the loan (which can be quite complex, as we’ll see)
The loan goes through and everyone’s happy. Presumably, the company likes its lenders, the lenders like the company
The original investors might sell the loans they own to other investors. The company’s only talking to an administrative agent representing the lenders, so over time it might not even know who its lenders are

In November 2021, prominent investment managers such as Blackstone, Fidelity and GIC had gone overboard to lend money to Byju’s. By September 2022, Byju’s lenders were desperately selling [2] their loans at a 36% discount on the principal. (Today, Byju’s debt is at a 20% discount, which is also bad.)
It’s likely that Blackstone, Fidelity and other of the OG lenders aren’t Byju’s’ lenders any more. They’ve almost certainly sold off their loans at a loss. Better get paid something than get paid nothing.
Dealers of the dead
If a company’s debt is being sold at a 36% discount, it’s because investors think that the company is unlikely to repay its loans. If you buy such a loan, you potentially stand to gain a lot—because of the discount—but well, you might also just lose everything.
If you’re a regular investment management company, like Blackstone, you don’t want to invest in such a loan. Your investors gave you this money to get predictable returns. If they wanted risk, they’d ask you to buy stocks. You don’t want to get into a fight with your borrower. If you feel they will not pay you back, you take a loss, sell the loans, move on.
If you’re a distressed debt investor, your entire business is to buy such distressed loans from regular investment managers like Blackstone. You’re going to get nasty borrowers who are unlikely to want to repay their loans but that’s okay. Because you’re nasty too. You spend less time on financial models, more in courts and around lawyers. You like to fight to get your money back. Sometimes you might lose, but the times you win, you win big. The wins cover your losses and some more.
Blackstone and the others sold Byju’s’ loans in desperation, and they were almost certainly bought by distressed debt investors. We don’t know who they are exactly, but Byju’s has indicated that one of them is Redwood Capital, a New York-based distressed debt investor.
If you’re a distressed debt investor, this is how it works:

You get a loan for super cheap
If the company repays its loan, great! You make a lot of money
But the company isn’t likely to repay, which is why you got the loan for cheap in the first place
So it’s in your best interest to not let the company die a slow death. Instead, you want to kill the company quick. You take the company to court ASAP and take all the money you’re owed while it’s still there

If the new investors waited, say, for a year, and took Byju’s to court after it had actually defaulted on its repayments—there might not be any money left! Byju’s may have given all the money to Lionel Messi or maybe laundered it away someplace the lenders wouldn’t find it. If you’re a distressed debt investor, you want to get Byju’s to court and get the court to force it to do whatever it takes to pay you back.
Last month, Byju’s’ new lenders sued Byju’s in the Delaware Court of Chancery [3]. We’ll get to the official reasons for this lawsuit in a bit, but what’s important is that Byju’s was not being sued because it defaulted on a payment. It hadn’t. It was being sued because the distressed debt investors expect it to default sooner or later, and they would prefer dealing with it sooner rather than later.
Lenders go for the kill
Usually, the finer details of corporate loans such as Byju’s’ aren’t public. But thanks to the multiple lawsuits we know quite a bit here.
The loan was made to Byju’s’ US entity and it was secured with guarantees from multiple Byju’s companies. From Byju’s’ lawsuit this week against its creditors (which I will get to), here are the guarantors:

Byju’s entities in India and Singapore
Byju’s’ US and Singapore acquisitions; companies including Oros, Epic, Great Learning, and Neuron
Whitehat India, Byju’s’ famous Indian acquisition

That’s a lot of companies guaranteeing a loan! Byju’s’ Indian entity is the parent of all the other guarantor companies, so having it as a guarantor should’ve been enough. I guess the rationale here was that it would be nice to have some non-Indian companies in the mix too, we do know how efficiently Indian courts work.
Apart from Byju’s the parent company itself, Whitehat was the only other Indian company guaranteeing this loan. The problem was that Whitehat itself, on paper, had negative net worth. It had probably taken loans of its own and did not have enough assets to cover them. In practice, this would be irrelevant, because Whitehat was owned by Byju’s and it would cover any of Whitehat’s liabilities. But, apparently, RBI regulations require Indian companies with negative net worth to take its approval before guaranteeing a loan. So even though Whitehat was a guarantor, the guarantee was meaningless until RBI granted its approval.
Yeah, well, RBI didn’t grant its approval. From the lawsuit:

Plaintiffs, Borrower, and Lenders had a call on or around October 6, 2022, to discuss the Whitehat Guarantee. In a good faith effort to negate any impact of the new regulations, Plaintiffs and the Borrower offered to move all assets out of Whitehat India into other subsidiaries of the Parent Guarantor that are Guarantors to the Credit Agreement, or are owned by Guarantors of the Credit Agreement. Lenders rejected this proposal without justification.

In October 2022, after Byju’s’ debt was already sold to the distressed debt investors, the company spoke to its lenders and informed them that it was unable to get RBI’s approval for Whitehat to be a guarantor. Instead, it offered to move Whitehat’s assets into other companies and then use those companies to guarantee the loan. Which would really have been the same thing. But the lenders refused! Why?!
Continuing from the lawsuit:

Lenders subsequently asserted that an event of default under Section 8.1(e) of the Credit Agreement (an “Event of Default”) had occurred due to the failure to procure the Whitehat Guarantee.

Oh, that’s why. Byju’s’ lenders—distressed debt investors that wanted Byju’s dead ASAP—used the fact that Whitehat couldn’t be a guarantor of this loan to claim a default and use it as a reason to take Byju’s to court in the US. Honestly, I’m impressed. The Whitehat guarantee was redundant to begin with, but the lenders had found an out and their official reason #1 to take Byju’s to court.
Oh, there’s another thing. In June 2022, The Ken reported that Byju’s’ financials for 2021 had been held up by its auditors because of certain, umm, creative accounting. By this time, Byju’s should have ideally filed even its 2022 financials. It was very late! From the lawsuit:

The FY’21 Audit was delivered to the Lenders on August 30, 2022. It did not contain a “going concern” qualification or any similar qualifications about the Parent Guarantor’s ability to continue into the future. However, the FY’22 Audit could not begin until the FY’21 Audit had been completed, and the Parent Guarantor’s business has continued to grow rapidly

Byju’s’ 2021 financials were held up because auditors weren’t giving the company their go ahead, so of course its 2022 financials were held up as well.

On or around August 29, 2022, Shearman & Sterling, LLP (“S&S”), counsel for GLAS, sent a letter to Byju’s Alpha and Think & Learn requesting certain financial disclosures from Plaintiffs and Borrower, and asserting that the failure to deliver this financial information was a breach of the Credit Agreement. ... Rather than actually suffering any damage from the delayed FY’22 audit, Lenders opportunistically used this unintentional and non-material delay to exert pressure on Plaintiffs and the Borrower to extract onerous economic concessions.

I love it! Byju’s’ financials were delayed. Its agreement with the original lenders said that the company must share its audited financials with them. Byju’s wasn’t able to do that. The lenders found their official reason #2 to take Byju’s to court.
Byju’s sets up an offence
Before the lenders sued Byju’s last month, Byju’s tried its best to negotiate a deal. It gave the lenders an assurance of the company’s financial health, gave them concessions worth “tens of millions of dollars” and requested (pleaded) to take back their claims of Byju’s defaulting.
The lenders refused. They asked for either the full principal back or two-thirds of it, with an increment of 7% (!!) in the interest rate. Byju’s, of course, said no.
At this point, Byju’s knew that the lenders weren’t going to negotiate realistically. So it prepared its own offence. From the lawsuit:

The Credit Agreement prohibits transfers or assignments of the Lenders’ interests in the Term Loans to “Disqualified Lenders.” The Credit Agreement includes in its definition of Disqualified Lender “[a]ny [] Person (including an Affiliate or Approved Fund of a Lender) whose primary activity is the trading or acquisition of distressed debt,” and “those banks, financial institutions and other Persons separately identified by name . . . on or before the syndication . . . (which may be updated . . . from time to time . . .)”

In its agreement with the original lenders, Byju’s had put in a clause restricting its loan from being transferred to distressed debt investors. This is a risky clause to agree with, because it’s only these folks that buy loans that turn sour, but the original lenders had gone with it.

On information and belief, the entire course of Lenders’, and Defendant’s, bad-faith conduct has been driven by these distressed-debt lenders, who were never meant to have been lenders in the first place, and who acted with the intent of causing harm to Borrower and Plaintiffs. Meanwhile, Borrowers and Plaintiffs were initially unaware that the lenders were in fact being controlled by distressed debt dealers, and were therefore unable to take action to prevent their bad-faith plan from being implemented.

In its lawsuit this week, the crux of Byju’s’ argument is based on the fact that its loan is owned by distressed debt investors who were not eligible to be owning its debt in the first place. Also interesting is that Byju’s doesn’t seem to know who these lenders are. In its post-lawsuit statement, Byju’s named Redwood as one of the lenders, but it’s not named anywhere in the lawsuit.
Now what?
If push comes to shove, does Byju’s have the cash to pay off its lenders?
Last month, Byju’s transferred $500 million out of its US entity. The lenders had filed their lawsuit and there was a chance the court would freeze Byju’s’ US entity’s assets, so this was a precautionary move. So Byju’s has this $500 million. But that seems about it. Byju’s has been in the news saying that it’s trying to raise $700 million to pay off its debt. Yeah, between the horrible edtech market and the colourful lawsuits Byju’s is in, good luck with getting investors to donate their money to Byju’s.
But of course, Byju’s is now suing its lenders too. It does have an agreement that says that its debt can’t be held by distressed debt investors. So it’s not a frivolous suit.
Can Byju’s win? Sure. It would still have to pay its debt eventually. And it’s not straightforward. There are probably tens or even hundreds of lenders. It’s apparent that the distressed debt investors are the guiding force behind the lenders’ lawsuit, but it’s definitely not necessary that they form the majority of the lenders. In which case, Byju’s’ whole lawsuit falls apart.
The lenders are saying Byju’s defaulted by not keeping its part of the agreement, even though it had technically paid its dues. [4] Byju’s is saying that the lenders shouldn’t be the lenders in the first place and must be disqualified. We’ll see who’s right.
Footnotes
[1] It was a 5-year loan with a floating interest rate of 6% over Libor. Think of it as 6% over this magical interest-rate called Libor that some fancy-pants banks set amongst themselves everyday. Back in November 2021, Libor was at 0.25% and this was a 6.86% interest loan for Byju’s (the floor for Libor was 0.75%). Today, Libor is at about 5.64% and it’s an 11.6% loan.
[2] Multiple reasons for the investors to sell. One, interest rates went up and cash became more dear. If they had money stuck with Byju’s, it was money not being lent out to someone else. Second, edtech all around the world was in trouble. Kids were back in school and people didn’t think much of them anymore. Third, Byju’s as a company was showing its red flags.
[3] What a cool name!
[4] Until now, that is. Byju’s filed its lawsuit this week the same day it was supposed to make a $40 million interest payment.
Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders

Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders (my newsletter Boring Money -- please visit the link if you'd like to subscribe and receive similar posts in your inbox)
Spotify for voiceover
--
Four years ago I read an article in The Ken titled The making of a loan crisis at Byju’s. The gist of the story was that Byju’s was an edtech doing phenomenally well selling its digital courses to parents of young students. But these courses were expensive and these parents were poor. So it was also selling them loans to buy these courses. Only, without telling them. Parents would expect a course (which could be cancelled) but would end up with a loan (which couldn’t be cancelled).
Three days ago, Byju’s went to court in New York. Here’s the headline from TechCrunch: Byju’s sues ‘predatory’ lenders on $1.2B term loan, won’t make further payments.
Byju’s is a company that, arguably, made a business out of giving out predatory loans. Now it’s sued its own lenders and accused them of being predatory. I’m not saying that this is poetic justice but.. okay, scratch that. This is poetic justice! If Shakespeare were a finance writer this is the kind of stuff he would come up with.
Everyone wants to lend to Byju’s
In 2021, interest rates were low, loans were cheap. Tech startups were doing great, edtech startups were crushing it. Byju’s, not one to be left behind, had raised a lot of money but money was cheap so it also wanted to borrow. It wanted a $500 million loan from lenders in the US, which it wanted to use to acquire companies there. Instead, it ended up borrowing more than double—$1.2 billion—because lenders practically wanted to throw money at this overachieving edtech startup from India. [1]
The way a term loan such as this works is:

A company goes to an investment bank and asks for a loan
The bank syndicates this loan to investors, who become the lenders. Everyone comes together in a room and negotiates the specifics of the loan (which can be quite complex, as we’ll see)
The loan goes through and everyone’s happy. Presumably, the company likes its lenders, the lenders like the company
The original investors might sell the loans they own to other investors. The company’s only talking to an administrative agent representing the lenders, so over time it might not even know who its lenders are

In November 2021, prominent investment managers such as Blackstone, Fidelity and GIC had gone overboard to lend money to Byju’s. By September 2022, Byju’s lenders were desperately selling [2] their loans at a 36% discount on the principal. (Today, Byju’s debt is at a 20% discount, which is also bad.)
It’s likely that Blackstone, Fidelity and other of the OG lenders aren’t Byju’s’ lenders any more. They’ve almost certainly sold off their loans at a loss. Better get paid something than get paid nothing.
Dealers of the dead
If a company’s debt is being sold at a 36% discount, it’s because investors think that the company is unlikely to repay its loans. If you buy such a loan, you potentially stand to gain a lot—because of the discount—but well, you might also just lose everything.
If you’re a regular investment management company, like Blackstone, you don’t want to invest in such a loan. Your investors gave you this money to get predictable returns. If they wanted risk, they’d ask you to buy stocks. You don’t want to get into a fight with your borrower. If you feel they will not pay you back, you take a loss, sell the loans, move on.
If you’re a distressed debt investor, your entire business is to buy such distressed loans from regular investment managers like Blackstone. You’re going to get nasty borrowers who are unlikely to want to repay their loans but that’s okay. Because you’re nasty too. You spend less time on financial models, more in courts and around lawyers. You like to fight to get your money back. Sometimes you might lose, but the times you win, you win big. The wins cover your losses and some more.
Blackstone and the others sold Byju’s’ loans in desperation, and they were almost certainly bought by distressed debt investors. We don’t know who they are exactly, but Byju’s has indicated that one of them is Redwood Capital, a New York-based distressed debt investor.
If you’re a distressed debt investor, this is how it works:

You get a loan for super cheap
If the company repays its loan, great! You make a lot of money
But the company isn’t likely to repay, which is why you got the loan for cheap in the first place
So it’s in your best interest to not let the company die a slow death. Instead, you want to kill the company quick. You take the company to court ASAP and take all the money you’re owed while it’s still there

If the new investors waited, say, for a year, and took Byju’s to court after it had actually defaulted on its repayments—there might not be any money left! Byju’s may have given all the money to Lionel Messi or maybe laundered it away someplace the lenders wouldn’t find it. If you’re a distressed debt investor, you want to get Byju’s to court and get the court to force it to do whatever it takes to pay you back.
Last month, Byju’s’ new lenders sued Byju’s in the Delaware Court of Chancery [3]. We’ll get to the official reasons for this lawsuit in a bit, but what’s important is that Byju’s was not being sued because it defaulted on a payment. It hadn’t. It was being sued because the distressed debt investors expect it to default sooner or later, and they would prefer dealing with it sooner rather than later.
Lenders go for the kill
Usually, the finer details of corporate loans such as Byju’s’ aren’t public. But thanks to the multiple lawsuits we know quite a bit here.
The loan was made to Byju’s’ US entity and it was secured with guarantees from multiple Byju’s companies. From Byju’s’ lawsuit this week against its creditors (which I will get to), here are the guarantors:

Byju’s entities in India and Singapore
Byju’s’ US and Singapore acquisitions; companies including Oros, Epic, Great Learning, and Neuron
Whitehat India, Byju’s’ famous Indian acquisition

That’s a lot of companies guaranteeing a loan! Byju’s’ Indian entity is the parent of all the other guarantor companies, so having it as a guarantor should’ve been enough. I guess the rationale here was that it would be nice to have some non-Indian companies in the mix too, we do know how efficiently Indian courts work.
Apart from Byju’s the parent company itself, Whitehat was the only other Indian company guaranteeing this loan. The problem was that Whitehat itself, on paper, had negative net worth. It had probably taken loans of its own and did not have enough assets to cover them. In practice, this would be irrelevant, because Whitehat was owned by Byju’s and it would cover any of Whitehat’s liabilities. But, apparently, RBI regulations require Indian companies with negative net worth to take its approval before guaranteeing a loan. So even though Whitehat was a guarantor, the guarantee was meaningless until RBI granted its approval.
Yeah, well, RBI didn’t grant its approval. From the lawsuit:

Plaintiffs, Borrower, and Lenders had a call on or around October 6, 2022, to discuss the Whitehat Guarantee. In a good faith effort to negate any impact of the new regulations, Plaintiffs and the Borrower offered to move all assets out of Whitehat India into other subsidiaries of the Parent Guarantor that are Guarantors to the Credit Agreement, or are owned by Guarantors of the Credit Agreement. Lenders rejected this proposal without justification.

In October 2022, after Byju’s’ debt was already sold to the distressed debt investors, the company spoke to its lenders and informed them that it was unable to get RBI’s approval for Whitehat to be a guarantor. Instead, it offered to move Whitehat’s assets into other companies and then use those companies to guarantee the loan. Which would really have been the same thing. But the lenders refused! Why?!
Continuing from the lawsuit:

Lenders subsequently asserted that an event of default under Section 8.1(e) of the Credit Agreement (an “Event of Default”) had occurred due to the failure to procure the Whitehat Guarantee.

Oh, that’s why. Byju’s’ lenders—distressed debt investors that wanted Byju’s dead ASAP—used the fact that Whitehat couldn’t be a guarantor of this loan to claim a default and use it as a reason to take Byju’s to court in the US. Honestly, I’m impressed. The Whitehat guarantee was redundant to begin with, but the lenders had found an out and their official reason #1 to take Byju’s to court.
Oh, there’s another thing. In June 2022, The Ken reported that Byju’s’ financials for 2021 had been held up by its auditors because of certain, umm, creative accounting. By this time, Byju’s should have ideally filed even its 2022 financials. It was very late! From the lawsuit:

The FY’21 Audit was delivered to the Lenders on August 30, 2022. It did not contain a “going concern” qualification or any similar qualifications about the Parent Guarantor’s ability to continue into the future. However, the FY’22 Audit could not begin until the FY’21 Audit had been completed, and the Parent Guarantor’s business has continued to grow rapidly

Byju’s’ 2021 financials were held up because auditors weren’t giving the company their go ahead, so of course its 2022 financials were held up as well.

On or around August 29, 2022, Shearman & Sterling, LLP (“S&S”), counsel for GLAS, sent a letter to Byju’s Alpha and Think & Learn requesting certain financial disclosures from Plaintiffs and Borrower, and asserting that the failure to deliver this financial information was a breach of the Credit Agreement. ... Rather than actually suffering any damage from the delayed FY’22 audit, Lenders opportunistically used this unintentional and non-material delay to exert pressure on Plaintiffs and the Borrower to extract onerous economic concessions.

I love it! Byju’s’ financials were delayed. Its agreement with the original lenders said that the company must share its audited financials with them. Byju’s wasn’t able to do that. The lenders found their official reason #2 to take Byju’s to court.
Byju’s sets up an offence
Before the lenders sued Byju’s last month, Byju’s tried its best to negotiate a deal. It gave the lenders an assurance of the company’s financial health, gave them concessions worth “tens of millions of dollars” and requested (pleaded) to take back their claims of Byju’s defaulting.
The lenders refused. They asked for either the full principal back or two-thirds of it, with an increment of 7% (!!) in the interest rate. Byju’s, of course, said no.
At this point, Byju’s knew that the lenders weren’t going to negotiate realistically. So it prepared its own offence. From the lawsuit:

The Credit Agreement prohibits transfers or assignments of the Lenders’ interests in the Term Loans to “Disqualified Lenders.” The Credit Agreement includes in its definition of Disqualified Lender “[a]ny [] Person (including an Affiliate or Approved Fund of a Lender) whose primary activity is the trading or acquisition of distressed debt,” and “those banks, financial institutions and other Persons separately identified by name . . . on or before the syndication . . . (which may be updated . . . from time to time . . .)”

In its agreement with the original lenders, Byju’s had put in a clause restricting its loan from being transferred to distressed debt investors. This is a risky clause to agree with, because it’s only these folks that buy loans that turn sour, but the original lenders had gone with it.

On information and belief, the entire course of Lenders’, and Defendant’s, bad-faith conduct has been driven by these distressed-debt lenders, who were never meant to have been lenders in the first place, and who acted with the intent of causing harm to Borrower and Plaintiffs. Meanwhile, Borrowers and Plaintiffs were initially unaware that the lenders were in fact being controlled by distressed debt dealers, and were therefore unable to take action to prevent their bad-faith plan from being implemented.

In its lawsuit this week, the crux of Byju’s’ argument is based on the fact that its loan is owned by distressed debt investors who were not eligible to be owning its debt in the first place. Also interesting is that Byju’s doesn’t seem to know who these lenders are. In its post-lawsuit statement, Byju’s named Redwood as one of the lenders, but it’s not named anywhere in the lawsuit.
Now what?
If push comes to shove, does Byju’s have the cash to pay off its lenders?
Last month, Byju’s transferred $500 million out of its US entity. The lenders had filed their lawsuit and there was a chance the court would freeze Byju’s’ US entity’s assets, so this was a precautionary move. So Byju’s has this $500 million. But that seems about it. Byju’s has been in the news saying that it’s trying to raise $700 million to pay off its debt. Yeah, between the horrible edtech market and the colourful lawsuits Byju’s is in, good luck with getting investors to donate their money to Byju’s.
But of course, Byju’s is now suing its lenders too. It does have an agreement that says that its debt can’t be held by distressed debt investors. So it’s not a frivolous suit.
Can Byju’s win? Sure. It would still have to pay its debt eventually. And it’s not straightforward. There are probably tens or even hundreds of lenders. It’s apparent that the distressed debt investors are the guiding force behind the lenders’ lawsuit, but it’s definitely not necessary that they form the majority of the lenders. In which case, Byju’s’ whole lawsuit falls apart.
The lenders are saying Byju’s defaulted by not keeping its part of the agreement, even though it had technically paid its dues. [4] Byju’s is saying that the lenders shouldn’t be the lenders in the first place and must be disqualified. We’ll see who’s right.
Footnotes
[1] It was a 5-year loan with a floating interest rate of 6% over Libor. Think of it as 6% over this magical interest-rate called Libor that some fancy-pants banks set amongst themselves everyday. Back in November 2021, Libor was at 0.25% and this was a 6.86% interest loan for Byju’s (the floor for Libor was 0.75%). Today, Libor is at about 5.64% and it’s an 11.6% loan.
[2] Multiple reasons for the investors to sell. One, interest rates went up and cash became more dear. If they had money stuck with Byju’s, it was money not being lent out to someone else. Second, edtech all around the world was in trouble. Kids were back in school and people didn’t think much of them anymore. Third, Byju’s as a company was showing its red flags.
[3] What a cool name!
[4] Until now, that is. Byju’s filed its lawsuit this week the same day it was supposed to make a $40 million interest payment.
Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders

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Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders (my newsletter Boring Money -- please visit the link if you'd like to subscribe and receive similar posts in your inbox)
--
Four years ago I read an article in The Ken titled The making of a loan crisis at Byju’s. The gist of the story was that Byju’s was an edtech doing phenomenally well selling its digital courses to parents of young students. But these courses were expensive and these parents were poor. So it was also selling them loans to buy these courses. Only, without telling them. Parents would expect a course (which could be cancelled) but would end up with a loan (which couldn’t be cancelled).
Three days ago, Byju’s went to court in New York. Here’s the headline from TechCrunch: Byju’s sues ‘predatory’ lenders on $1.2B term loan, won’t make further payments.
Byju’s is a company that, arguably, made a business out of giving out predatory loans. Now it’s sued its own lenders and accused them of being predatory. I’m not saying that this is poetic justice but.. okay, scratch that. This is poetic justice! If Shakespeare were a finance writer this is the kind of stuff he would come up with.

Everyone wants to lend to Byju’s

In 2021, interest rates were low, loans were cheap. Tech startups were doing great, edtech startups were crushing it. Byju’s, not one to be left behind, had raised a lot of money but money was cheap so it also wanted to borrow. It wanted a $500 million loan from lenders in the US, which it wanted to use to acquire companies there. Instead, it ended up borrowing more than double—$1.2 billion—because lenders practically wanted to throw money at this overachieving edtech startup from India. [1]
The way a term loan such as this works is:

A company goes to an investment bank and asks for a loan
The bank syndicates this loan to investors, who become the lenders. Everyone comes together in a room and negotiates the specifics of the loan (which can be quite complex, as we’ll see)
The loan goes through and everyone’s happy. Presumably, the company likes its lenders, the lenders like the company
The original investors might sell the loans they own to other investors. The company’s only talking to an administrative agent representing the lenders, so over time it might not even know who its lenders are

In November 2021, prominent investment managers such as Blackstone, Fidelity and GIC had gone overboard to lend money to Byju’s. By September 2022, Byju’s lenders were desperately selling [2] their loans at a 36% discount on the principal. (Today, Byju’s debt is at a 20% discount, which is also bad.)
It’s likely that Blackstone, Fidelity and other of the OG lenders aren’t Byju’s’ lenders any more. They’ve almost certainly sold off their loans at a loss. Better get paid something than get paid nothing.

Dealers of the dead

If a company’s debt is being sold at a 36% discount, it’s because investors think that the company is unlikely to repay its loans. If you buy such a loan, you potentially stand to gain a lot—because of the discount—but well, you might also just lose everything.
If you’re a regular investment management company, like Blackstone, you don’t want to invest in such a loan. Your investors gave you this money to get predictable returns. If they wanted risk, they’d ask you to buy stocks. You don’t want to get into a fight with your borrower. If you feel they will not pay you back, you take a loss, sell the loans, move on.
If you’re a distressed debt investor, your entire business is to buy such distressed loans from regular investment managers like Blackstone. You’re going to get nasty borrowers who are unlikely to want to repay their loans but that’s okay. Because you’re nasty too. You spend less time on financial models, more in courts and around lawyers. You like to fight to get your money back. Sometimes you might lose, but the times you win, you win big. The wins cover your losses and some more.
Blackstone and the others sold Byju’s’ loans in desperation, and they were almost certainly bought by distressed debt investors. We don’t know who they are exactly, but Byju’s has indicated that one of them is Redwood Capital, a New York-based distressed debt investor.
If you’re a distressed debt investor, this is how it works:

You get a loan for super cheap
If the company repays its loan, great! You make a lot of money
But the company isn’t likely to repay, which is why you got the loan for cheap in the first place
So it’s in your best interest to not let the company die a slow death. Instead, you want to kill the company quick. You take the company to court ASAP and take all the money you’re owed while it’s still there

If the new investors waited, say, for a year, and took Byju’s to court after it had actually defaulted on its repayments—there might not be any money left! Byju’s may have given all the money to Lionel Messi or maybe laundered it away someplace the lenders wouldn’t find it. If you’re a distressed debt investor, you want to get Byju’s to court and get the court to force it to do whatever it takes to pay you back.
Last month, Byju’s’ new lenders sued Byju’s in the Delaware Court of Chancery [3]. We’ll get to the official reasons for this lawsuit in a bit, but what’s important is that Byju’s was not being sued because it defaulted on a payment. It hadn’t. It was being sued because the distressed debt investors expect it to default sooner or later, and they would prefer dealing with it sooner rather than later.

Lenders go for the kill

Usually, the finer details of corporate loans such as Byju’s’ aren’t public. But thanks to the multiple lawsuits we know quite a bit here.
The loan was made to Byju’s’ US entity and it was secured with guarantees from multiple Byju’s companies. From Byju’s’ lawsuit this week against its creditors (which I will get to), here are the guarantors:

Byju’s entities in India and Singapore
Byju’s’ US and Singapore acquisitions; companies including Oros, Epic, Great Learning, and Neuron
Whitehat India, Byju’s’ famous Indian acquisition

That’s a lot of companies guaranteeing a loan! Byju’s’ Indian entity is the parent of all the other guarantor companies, so having it as a guarantor should’ve been enough. I guess the rationale here was that it would be nice to have some non-Indian companies in the mix too, we do know how efficiently Indian courts work.
Apart from Byju’s the parent company itself, Whitehat was the only other Indian company guaranteeing this loan. The problem was that Whitehat itself, on paper, had negative net worth. It had probably taken loans of its own and did not have enough assets to cover them. In practice, this would be irrelevant, because Whitehat was owned by Byju’s and it would cover any of Whitehat’s liabilities. But, apparently, RBI regulations require Indian companies with negative net worth to take its approval before guaranteeing a loan. So even though Whitehat was a guarantor, the guarantee was meaningless until RBI granted its approval.
Yeah, well, RBI didn’t grant its approval. From the lawsuit:

Plaintiffs, Borrower, and Lenders had a call on or around October 6, 2022, to discuss the Whitehat Guarantee. In a good faith effort to negate any impact of the new regulations, Plaintiffs and the Borrower offered to move all assets out of Whitehat India into other subsidiaries of the Parent Guarantor that are Guarantors to the Credit Agreement, or are owned by Guarantors of the Credit Agreement.
Lenders rejected this proposal without justification.

In October 2022, after Byju’s’ debt was already sold to the distressed debt investors, the company spoke to its lenders and informed them that it was unable to get RBI’s approval for Whitehat to be a guarantor. Instead, it offered to move Whitehat’s assets into other companies and then use those companies to guarantee the loan. Which would really have been the same thing. But the lenders refused! Why?!
Continuing from the lawsuit:

Lenders subsequently asserted that an event of default under Section 8.1(e) of the Credit Agreement (an “Event of Default”) had occurred due to the failure to procure the Whitehat Guarantee.

Oh, that’s why. Byju’s’ lenders—distressed debt investors that wanted Byju’s dead ASAP—used the fact that Whitehat couldn’t be a guarantor of this loan to claim a default and use it as a reason to take Byju’s to court in the US. Honestly, I’m impressed. The Whitehat guarantee was redundant to begin with, but the lenders had found an out and their official reason #1 to take Byju’s to court.
Oh, there’s another thing. In June 2022, The Ken reported that Byju’s’ financials for 2021 had been held up by its auditors because of certain, umm, creative accounting. By this time, Byju’s should have ideally filed even its 2022 financials. It was very late! From the lawsuit:

The FY’21 Audit was delivered to the Lenders on August 30, 2022. It did not contain a “going concern” qualification or any similar qualifications about the Parent Guarantor’s ability to continue into the future.
However, the FY’22 Audit could not begin until the FY’21 Audit had been completed, and the Parent Guarantor’s business has continued to grow rapidly

Byju’s’ 2021 financials were held up because auditors weren’t giving the company their go ahead, so of course its 2022 financials were held up as well.

On or around August 29, 2022, Shearman & Sterling, LLP (“S&S”), counsel for GLAS, sent a letter to Byju’s Alpha and Think & Learn requesting certain financial disclosures from Plaintiffs and Borrower, and asserting that the failure to deliver this financial information was a breach of the Credit Agreement.
...
Rather than actually suffering any damage from the delayed FY’22 audit, Lenders opportunistically used this unintentional and non-material delay to exert pressure on Plaintiffs and the Borrower to extract onerous economic concessions.

I love it! Byju’s’ financials were delayed. Its agreement with the original lenders said that the company must share its audited financials with them. Byju’s wasn’t able to do that. The lenders found their official reason #2 to take Byju’s to court.

Byju’s sets up an offence

Before the lenders sued Byju’s last month, Byju’s tried its best to negotiate a deal. It gave the lenders an assurance of the company’s financial health, gave them concessions worth “tens of millions of dollars” and requested (pleaded) to take back their claims of Byju’s defaulting.
The lenders refused. They asked for either the full principal back or two-thirds of it, with an increment of 7% (!!) in the interest rate. Byju’s, of course, said no.
At this point, Byju’s knew that the lenders weren’t going to negotiate realistically. So it prepared its own offence. From the lawsuit:

The Credit Agreement prohibits transfers or assignments of the Lenders’ interests in the Term Loans to “Disqualified Lenders.”
The Credit Agreement includes in its definition of Disqualified Lender “[a]ny [] Person (including an Affiliate or Approved Fund of a Lender) whose primary activity is the trading or acquisition of distressed debt,” and “those banks, financial institutions and other Persons separately identified by name . . . on or before the syndication . . . (which may be updated . . . from time to time . . .)”

In its agreement with the original lenders, Byju’s had put in a clause restricting its loan from being transferred to distressed debt investors. This is a risky clause to agree with, because it’s only these folks that buy loans that turn sour, but the original lenders had gone with it.

On information and belief, the entire course of Lenders’, and Defendant’s, bad-faith conduct has been driven by these distressed-debt lenders, who were never meant to have been lenders in the first place, and who acted with the intent of causing harm to Borrower and Plaintiffs. Meanwhile, Borrowers and Plaintiffs were initially unaware that the lenders were in fact being controlled by distressed debt dealers, and were therefore unable to take action to prevent their bad-faith plan from being implemented.

In its lawsuit this week, the crux of Byju’s’ argument is based on the fact that its loan is owned by distressed debt investors who were not eligible to be owning its debt in the first place. Also interesting is that Byju’s doesn’t seem to know who these lenders are. In its post-lawsuit statement, Byju’s named Redwood as one of the lenders, but it’s not named anywhere in the lawsuit.

Now what?

If push comes to shove, does Byju’s have the cash to pay off its lenders?
Last month, Byju’s transferred $500 million out of its US entity. The lenders had filed their lawsuit and there was a chance the court would freeze Byju’s’ US entity’s assets, so this was a precautionary move. So Byju’s has this $500 million. But that seems about it. Byju’s has been in the news saying that it’s trying to raise $700 million to pay off its debt. Yeah, between the horrible edtech market and the colourful lawsuits Byju’s is in, good luck with getting investors to donate their money to Byju’s.
But of course, Byju’s is now suing its lenders too. It does have an agreement that says that its debt can’t be held by distressed debt investors. So it’s not a frivolous suit.
Can Byju’s win? Sure. It would still have to pay its debt eventually. And it’s not straightforward. There are probably tens or even hundreds of lenders. It’s apparent that the distressed debt investors are the guiding force behind the lenders’ lawsuit, but it’s definitely not necessary that they form the majority of the lenders. In which case, Byju’s’ whole lawsuit falls apart.
The lenders are saying Byju’s defaulted by not keeping its part of the agreement, even though it had technically paid its dues. [4] Byju’s is saying that the lenders shouldn’t be the lenders in the first place and must be disqualified. We’ll see who’s right.

Footnotes
[1] It was a 5-year loan with a floating interest rate of 6% over Libor. Think of it as 6% over this magical interest-rate called Libor that some fancy-pants banks set amongst themselves everyday. Back in November 2021, Libor was at 0.25% and this was a 6.86% interest loan for Byju’s (the floor for Libor was 0.75%). Today, Libor is at about 5.64% and it’s an 11.6% loan.
[2] Multiple reasons for the investors to sell. One, interest rates went up and cash became more dear. If they had money stuck with Byju’s, it was money not being lent out to someone else. Second, edtech all around the world was in trouble. Kids were back in school and people didn’t think much of them anymore. Third, Byju’s as a company was showing its red flags.
[3] What a cool name!
[4] Until now, that is. Byju’s filed its lawsuit this week the same day it was supposed to make a $40 million interest payment.

Original Source: https://boringmoney.in/p/byjus-is-sued-by-its-lenders

Transportation is considered an essential component in the logistics sector because it assures the timely delivery of products from one place to another. Though there are several modes of transportation available, it is important to select the right one for your logistics requirements. This blog contains a discussion regarding distinct modes of transportation and when to use each, with an emphasis on CG Logistics' innovative logistics solutions.

Air transportation

In the logistics sector, air transportation is a significant mode of transportation, particularly for goods that must be transported rapidly and over long distances. CGL provides air transportation services through its collaboration with numerous aircraft charter companies and air charter companies in India.
In the context of air transportation, there are distinct types of aircraft that could be used, based on the size and weight of the cargo and the destination and urgency of delivery. For example, smaller cargo might be transported through light aircraft, while heavier and larger cargo might require the use of cargo planes and even commercial airlines.
CGL India has entered into partnerships with some of the best air charter companies that support it in delivering clients with a number of transportation services, including air freight, air cargo, and air charter services. Through these partnerships, CG Logistics is able to offer clients access to a large fleet of aircraft that could be used for numerous forms of cargo, from small packages to oversized and heavy cargo.
One of the primary benefits of air transportation is that it provides faster delivery times in comparison to other modes of transportation, like sea or road transport. For example, products that will take numerous weeks to transport by sea can be transported by air in a matter of hours or days, depending on the destination. This makes air transportation a preferred mode of transportation for urgent and time-sensitive cargo.
CGL also offers air transportation services for project cargo movement that include the transportation of complex and significant cargo for industrial projects. Such cargo may involve heavy equipment, machinery, and other oversized items. CGL India has the expertise to handle project cargo transportation through the air, ensuring that the cargo reaches its destination safely and efficiently.
Along with the air transportation services, CGL also provides customs clearance services for air cargo and air freight, ensuring that all relevant rules and regulations are complied with and the cargo is cleared for export or import.
Overall, the role of air transportation is vital in the logistics industry, and CGL offers a range of air transportation services through its partnerships with aircraft charter companies and air charter companies in India. With its capabilities in project cargo transportation and customs clearance services, CGL is capable of ensuring that customers’ cargo is safely and efficiently transported to its destination through air transportation.

Road transportation

Road transportation is a significant element of logistics and plays a major role in the timely delivery of products. It is normally the most simple and cost-effective mechanism for transportation for domestic shipments, particularly for short distances. CGL is one of the leading logistics service providers in India and provides a wide range of road transportation services to satisfy the different requirements of customers.
CG Logistics runs a large fleet of vehicles ranging from small vans to heavy-duty trucks. The vehicles are equipped with modern tracking systems, supporting real-time monitoring of the location and status of shipments. This assures that clients can track the movement of their goods at any time, giving them complete visibility and peace of mind.
One of the significant benefits of road transportation is its flexibility. Unlike other methods of transportation, road transportation permits the transportation of goods to almost any place, even those that are not accessible through other modes of transportation. This makes road transportation an ideal mode for the transportation of products to remote areas or places with poor connectivity.
Another benefit of road transportation is its speed. It is normally faster than other methods of transportation, particularly for short distances. This makes it an ideal selection for time-sensitive shipments that must be delivered rapidly.
CGL India provides a range of road transportation services, including full truckload and less-than-truckload transportation. FTL is appropriate for clients who need to transport a large number of goods, while LTL is appropriate for clients who need to transport smaller quantities of goods.
Along with traditional road transportation, CGL also provides other value-added services like warehousing, distribution, and customs clearance. This permits clients to benefit from end-to-end logistics solutions, saving them both cost and time.
Overall, road transportation is a significant element of logistics, and CGL is committed to offering reliable and efficient road transportation services to its clients. With a significant emphasis on innovation and technology, CGL is well-positioned to satisfy the evolving requirements of customers and the logistics sector as a whole.

Rail Transportation

It is a method of transportation that uses trains for the purpose of moving goods from one place to another. Rail transportation is considered an efficient and cost-effective method of moving large volumes of cargo over significant distances. In the logistics sector, rail transportation is a vital element of the supply chain, particularly for the movement of bulk goods.
CGL understands the significance of rail transportation and provides a comprehensive range of rail freight services to its clients. The rail transportation services of the company are designed to cater to the particular requirements of each customer, and they provide a cost-effective and efficient manner of moving goods across the nation. Moreover, CG Logistics is engaged in providing effective rail logistics solutions for customers in places lacking alternate modes of connectivity.
The following are the main benefits of rail transportation:

Cost-effective: Rail transportation is usually cheaper than other mechanisms of transportation, particularly for long distances and large volumes of goods.
Reliable: Rail transportation is recognized for its reliability and punctuality. Normally, trains have fixed schedules and routes that support the timely delivery of products.
Environmentally friendly: Rail transportation is considered a more environmentally friendly method of transportation than road or air transportation. Trains generate fewer emissions per ton of cargo moved.
Capacity: Rail transportation has a significant capacity to move a large volume of goods, making it an ideal choice for bulk products.

CGL’s rail transportation services include the following aspects:
Rail freight forwarding: CGL provides rail freight forwarding services to move goods around the nation.

Door-to-door delivery: The rail transportation system of CGL involves the door-to-door delivery of products, making it simple for clients to move goods from one place to another.
Containerized transportation: CGL is engaged in providing containerized transportation services that permit the safe and secure movement of products.
Project cargo movement: The rail transportation services of CGL can be customized to suit the particular requirements of clients, involving the movement of heavy and oversized project cargo.

Overall, in the logistics sector, the role of rail transportation is vital, and CGL recognizes its significance by providing a range of rail transportation services to its clients. With its reliable, cost-effective, and environmentally friendly rail transportation solutions, CGL is capable of satisfying the requirements of clients across the country.

Integrated solutions for CGL India

CGL has over 20 years of experience carrying tailor-made end-to-end solutions for integrated freight logistics for all scales of organizations around industry verticals. Through analyzing the prerequisites, experts at the company work to optimize the best solutions that save time and money for safe deliveries around the world.
Moreover, CGL India provides a range of integrated solutions that support clients in selecting the correct mode of transportation for their logistics requirements. As one of the best logistics companies in India, CGL provides customized solutions that include project cargo management, international warehousing services, project cargo handling services, and cargo transportation.
One of the main characteristics of the integrated solution offered by CGL India is its ability to integrate with other systems. The platform could be integrated with a variety of business systems, like an ERP system and an order management system, to offer businesses an overall view of their operations.
CGL’s integrated solutions also provide a range of value-added services like packaging, customs clearance, labeling, and many more. This could support businesses in simplification of their logistics operations and decrease the administrative pressure connected with the management of logistics.
Overall, the integrated solution of CG Logistics provides a comprehensive range of logistics solutions that can support businesses in streamlining their supply chain activities, optimizing their logistics procedures, and decreasing costs. CGL’s integrated solutions can help businesses stay competitive in the current fast-paced business environment.
In a nutshell, selecting the right mode of transportation for your logistics requirements is crucial to ensure the timely delivery of products. By providing a comprehensive range of logistics solutions that involve air, sea, surface, and rail transportation, CGL assures that clients have access to the correct mode of transportation for their logistics requirements. With an emphasis on innovation and technology, CG Logistics offers integrated solutions that support the optimization of supply chain efficiency and help clients stay ahead of the competition. In order to know more, connect with us.

4 Facts You Didn’t Know About the Remote Workforce The remote workforce is on the rise, but there are still a lot of
misconceptions about remote work in different countries.
Here are four facts you didn't know about remote work in America.

Remote work is in demand across all industries

According to the Bureau of Labour Statistics, in April 2018, 42% percent of employed Americans were "self-employed," which includes freelancers and independent contractors.
That's up from just 26% percent in 1997. With that being said, even though more jobs being done remotely now than ever before, many people have misconceptions that it's just for creative types or consultants—but freelance jobs span every industry and skill level possible.
There are several reasons for this trend. For one , remote work can offer a better work-life balance. Employees working from home or in coworking spaces can often avoid commute times and have more flexible hours. Additionally, remote work can be an excellent option for parents or caregivers who need to be available for their families.
Another reason for the growing popularity of remote work is that it's simply more efficient in many cases. Advancements in technology have made it simple to stay in touch and productive when working remotely.

Remote work isn't just a millennial thing

According to a 2020 poll from Flex Jobs, millennials are more likely to work remotely than older generations.
61% of millennials surveyed said they were "enthusiastic" about the prospect of working from home, while only 42% of Generation X-errs and 32% of baby boomers felt the same way.
But the data shows that remote work is gaining popularity across age groups. Various factors are influencing this recent phenomenon; among them is the rapid increase in the availability and use of personal electronics and high-speed digital internet connections.
What's more, the study found that remote work is not just a millennial thing. Most remote workers are over the age of 35.
So, if you're considering switching to remote work, know that you're not alone. Plenty of us are doing it, and we love it!

Remote workers aren't all freelancing full-time

According to a study by Global Workplace Analytics, 72% of people who telecommute do so at least 1 day per month for their primary employer.
So while we hear a lot about freelancing and remote jobs, there's a lot of people who work remotely and full-time for their primary job.
The demand for remote workers is high in the United States, especially among millennials. A recently published report shows that about half of US workers consider themselves better suited for work from home as an alternative. The presence of flexible schedules, no commuting, no required commute, and remote working are just some of the many reasons that working remotely is an excellent capability.
Of course, working remotely has its share of difficulties. For instance, it is impossible to maintain motivation when you are not working.

Remote work isn't just technology-related

While remote work is most often associated with tech companies, according to The Balance, there are remote opportunities in pretty much every industry.
Whether in the arts, healthcare, retail, education, or science… there's a job out there for you! So why is remote work so popular? There are several reasons. First, it offers a great deal of flexibility and independence. Workers can often set their hours and work anywhere they want (including from home).
Second, remote work tends to be very technology driven. This means that workers need to be comfortable using various types of technology, including computers, tablets, and smartphones.
Finally, remote work is often more productive than traditional office work. To build a remote team and a company, you must equip with tools and techniques to get the insight and work to A
To get insight, Time, Champ is the perfect software to manage your remote team and project simultaneously.
Time Champ offers productivity features to ensure that teams stay focused and on task.

Website and App Monitoring
Detailed Reporting
Optional Screenshots
Customizable Productivity Settings
And many more

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In 1991, Japan saw its working-age population hit a high point, coinciding with the zenith of its stock market. Since then, it's been a tale of lackluster growth. Alarmingly, China followed suit, reaching its own demographic peak in 2015. With some of the globe's lowest fertility rates and near-zero immigration, these nations are graying rapidly. Surprisingly, China risks turning old before becoming truly affluent. Claims that China's economy will surpass the US seem more like unfounded optimism than rational prediction. Is my analysis off the mark? Would appreciate your insights!

The slender and feminine frames of the four Star Sirens floated with an inhuman ease in the microgravity of their shuttle’s cabin, their prehensile feet and tails either dangling freely or clutching an opalescent perching rod. They stared with a novel curiosity out their window towards the small and relatively unsophisticated Earthly craft that had gradually been drifting its way towards their fleet.
“It’s still not answering hails, and I can’t find any sort of transponder or visual identification,” Akioneeda, the eldest of the group, sang in their musical and surgically precise language; the chevron-shaped slits over her trachea granting her a superhuman vocal range.
Using the glittering diodes embedded throughout her mauve skin, she fired jets of light to propel herself over to a crystalline computer terminal on the other side of the cabin.
“Why do they have to make their ships so ugly?” the magenta-skinned Pomoko asked; her large and bright cat-like irises constricting in their dark sclera as she squinted at the foreign craft in disdain.
Its design was a smoothly contoured rocket, with a rounded nose and a flaring aft that allowed it to hold both rear and forward-facing thrusters. Its dark hull was nearly invisible against the black of space, and coated in a radar-absorbent material that until recently had masked its approach. The Siren’s shuttle, in contrast, was a luminescent, bright-pink spiral seashell nestled in an array of gossamer-like radiators, sails, and solar panels that resembled blooming flower petals.
“I think the polite word is ‘spartan’,” the violet-skinned Kaliphimoa corrected her with an excited grin. The crystalline, oval exocortexes embedded on the sides of her elongated skull began flickering as she began reviewing any information that she thought might be pertinent. “Macrogravitals have a much harder time surviving in space than we do, so they have to be fairly pragmatic in the designs of their vessels. And remember that, unlike our ships, that rocket is meant to launch from and land on planets, so it has to be pretty rugged.”
“Kali, there can’t be any Macrogravitals on that thing; there’s no centrifuge,” the Cyan-skinned Vicillia pointed out. “Macrogravitals need macrogravity. It’s literally their defining characteristic.”
“They don’t die in microgravity, Vici,” Kali said with a roll of her eyes. “In olden times, baseline humans would spend months, sometimes even over a year living in space with no artificial gravity at all.”
“This isn’t the Apollo & Artemis Era, Kali. It’s virtually unheard of for Macrogravitals to leave cislunar space without a centrifuge,” Akioneeda said as she examined the telemetry on the intruding object. “That thing definitely has a habitat module, but Earth is on the other side of the sun right now. That’s weeks of travel, and that’s if its fusion rockets are functional. And it is a ship, not a habitat. Something like that is meant primarily for ground-to-orbit transport, and in a pinch travelling between the inner planets during optimal launch windows. It’s not intended to be lived in for prolonged periods of time. I don’t think it came here on purpose. It must have gotten knocked out of orbit and just found its way here. I wish I could tell for sure if there was someone inside, but its mini-magnetosphere is really scattering the sensor beams.”
“But doesn’t its magnetosphere mean there must be Macrogravitals inside?” Pomoko asked. “Even normal cosmic radiation is dangerous to humans without our enhanced DNA repair and chromamelanin, isn’t it?”
“They might have died before they had a chance to shut it off,” Kali suggested as tactfully as she could. “If there are bodies in there, we should recover them and send them back to Earth.”
“Wait a minute. It’s pretty suspicious that there’s no transponder or identifying markings on the craft, isn’t it?” Vici asked. “This could be a trap or terrorist attack of some kind.”
“An attack? Why would anyone want to attack us?” Pomoko asked in dismay.
“They wouldn’t. She’s being paranoid,” Kali said dismissively as she comfortingly slid her arm around her. “Vici, save your racist horror stories for when we’re not within visual distance of an Earth vessel, okay?”
“Reavers are real! Macrogravitals brains get cooked by cosmic radiation and they go crazy!” Vici insisted.
“Reavers are most definitively not real, Vicillia. Nonetheless, we probably shouldn’t rule out the possibility of an attack,” Akioneeda conceded. “Star Sirens now make up the majority of all humans permanently living off-world, and that’s not a lead we’re ever likely to lose. We’ve only been around a hundred years or so, and there are already over two million of us. We breed like rabbits.”
“That’s because we fuck like rabbits,” Vici said lasciviously, only to incur glares of confusion from the others. “Well, not directly, since we don’t reproduce naturally, but it’s good for our esprit de corps, right girls?”
“The point being, there are factions on Earth who view our current and forecasted success as a threat to their own potential expansion into space,” Akioneeda continued, failing to hide her annoyance at the younger Siren’s interruption.
“That’s backwards. Macrogravitals evolved to live on planets, and we were literally made to colonize space,” Pomoko objected. “Why shouldn’t we breed like rabbits? The solar system, the galaxy, the universe should be filled with as many Star Sirens as they can sustain!”
“And they will be – eventually. But if we prioritize our long-term survival over the near term, we might not have a future to prioritize,” Akioneeda gently reminded her. “Steady, safe, and sustainable growth is better than fast and risky growth. We don’t want to spook anyone down on Earth into doing something that might hurt us, which is why we have to abide by the Solaris Accords.”
“Exactly! We’re signatories of the Solaris and Orion Accords, which we’ve always been in complete compliance with,” Kali said. “We’ve already lowered our population growth to two percent per annum, and have agreed to lower it to point four percent when we hit two billion. Anyone attacking us over that would be in violation of the Accords and incur the wrath of every other signatory, including Olympeon, of which we are still a protectorate.”
“Ugh. Don’t remind me that we’re technically compatriots with Macrogravitals,” Vici said in disgust.
“Vicillia, a little respect please for our creators and allies,” Akioneeda reprimanded her.
“I gratefully respect them, Preceptress Akio, because no one able to launch this ship out to us would ever do something so suicidally foolish as commit an act of war against Olympeon,” Kali insisted.
“You make valid points, Kali, and I’m not saying it’s likely this is an attack, but we should still proceed with caution,” Akioneeda reiterated. “At the very least, the scanner still has enough resolution to rule out the possibility of there being any potential high-yield explosives on the vessel. I think it’s worth the risk to jet over and see what’s inside; if that’s something you girls would be interested in?”
“Yes, preceptress,” Kali and Vici said in unison, each immediately assuming an attentive posture with their hands behind their backs as they nodded politely, eager for the opportunity to explore a non-Siren spacecraft. Pomoko, however, joined in a little more reticently, and solely because she didn’t want to upset her companions.
Unlike Vici, she never told stories about Macrogravitals driven into mad savagery by the harshness of space, because she found them unbearably terrifying.
The four of them filed into the airlock and grabbed a lungful of air before depressurizing, the short siphons at the base of their necks cinching shut to hold it in. The only things they brought with them were a small bundle of additional air pods and a field kit, both of which were carried by Pomoko.
The enhanced proteins and nanofiber weaves in their bare skin rendered them impervious to vacuum exposure, and their eyes were protected by transparent graphene lenses. Hundreds of small jets of light from all over their bodies propelled them across the gap between their shuttle and the errant vessel, with Kali and Vici taking advantage of the vast open space to perform challenging acrobatic maneuvers.
Akio was the first to arrive at the foreign spacecraft, circling it several times for any signs that might give her some idea about what it was and what it was doing there, but found none. She even peered into a porthole, but could see nothing of note in the darkened interior.
When she reached the airlock, she gestured for Pomoko to hand her a small but rugged cyberdeck from the field kit. While her exocortexes possessed more computing power than she could ever need, the cyberdeck contained a compact suite of sensor arrays for environmental analysis, as well as antennas and ports for electronic interfaces. Syncing the device with her own exocortexes, a holographic AR display projected itself on her bionic lenses.
It didn’t take long for her to find a frequency to engage with the airlock control mechanism, and even less time to find a skeleton key that could best that woefully inadequate security system. As the outer door of the airlock dilated open, Akio signalled for Kali and Vici to rejoin them, and they all funnelled into the ship together. The outer door snapped behind them, sealing them in complete darkness that was staved off solely by their photonic diodes until some emergency lights began to flicker on and off at random intervals.
As the airlock slowly began to repressurize, the Sirens – who were accustomed to an atmosphere maintained at conditions optimal for them - shuddered slightly at the feeling of foreign air creeping up against their skin.
“The air’s acceptable. It’s a standard oxygen/nitrogen mix with no detectable toxins or pathogens present,” Akioneeda assured them as she opened her siphons and exhaled the breath she had been holding since they left their own shuttle. “CO2’s a little high, but not dangerous.”
“Doesn’t high CO2 mean there’s someone here?” Pomoko asked, nervously looking about in all directions as she clutched her supplies close to her.
“Not necessarily. I’m not detecting any human environmental DNA,” Akio replied confidently. “I am however sampling some environmental DNA that doesn’t match anything on file. It might take some time to analyze it enough to make any sense of it. The power system is failing, which is why the lights aren’t working right. The electrical surges are generating enough EM interference that the sensor beam is still pretty scattered, so I can’t see much through the bulkheads. Keep your diodes lit up bright and stay alert.”
The shadowy main corridor was hexagonal in shape, spanning several meters across and roughly twenty-five meters from end to end. It was broken into six segments, with every other segment containing a pair of hexagonal doorways across from one another, along with a door at each end of the corridor.
“The door next to us should be the engine module, and the one at the other end should be the command and communications center,” Akio said, opening the door to the engine room and sticking her cyberdeck inside. “I’m going to do a quick scan of each room before we start rummaging through everything, so don’t go sticking your tails anywhere they don’t belong until I’m done.”
The other three Sirens all nodded obediently, and limited their exploration of the ship to a solely visible inspection. None of them were used to being in low light conditions, and their pupils were dilated so much they were nearly round. Though their visual acuity was raptor-like in its detail and they could see into the ultra-violet spectrum, night vision had not been a priority when they had been designed. Nonetheless, their large eyes and vertical pupils still let them see better in the dark than any unmodified human.
“The writing is Cyrillic, but everything I can see is just basic labels. I can’t tell for certain which language it is,” Kali said. “That doesn’t mean much though. This thing is definitely second-hand, likely even stolen. That would explain the lack of identification. Maybe whoever stole it got spooked and just set it adrift.”
“So, it’s a pirate ship then?” Pomoko asked, sounding slightly relieved. “That’s better than terrorists, or Reavers.”
“It is not. We’re space mermaids. Space pirates are our natural enemies,” Vici claimed. “If they catch us, they’ll pry the exocortexes from our skulls and pluck out our photonic diodes one by one, then bind us to the front of the ship as figureheads.”
“Vicillia, that is enough!” Akio reprimanded her as she scanned the next room. “Stop trying to scare her! Kali’s right. This is an old ship that’s been stripped of nearly every non-essential piece of equipment. Someone stole it, and then abandoned it when the authorities started closing in. That’s it. There’s not a raiding party of pirates hiding behind one of these doors.”
“Famous last words,” Vici muttered, defensively folding her arms across her chest.
Kali once again put her arm around Pomoko in comfort and gave her a loving kiss on the head.
The glowing, sylph-like Sirens continued floating through the dim and unevenly lit corridor like ghosts, checking one room after another and finding nothing of note until they finally reached the end.
“Now that we’re done checking for pirates, we can focus on the command center,” Akio announced. “Assuming they haven’t been wiped, we’ll check the ship’s logs and records for evidence of its origin and how it got here. If it was stolen, we’ll send it to Pink Floyd Station and they can deal with it. Otherwise, we’ll be free to keep it as salvage.”
She raised her finger to tap the AR command to open the door, but suddenly hesitated.
“What is it?” Kali asked.
Akio squinted at her HUD display in alarm, but seemed reluctant to answer.
“There’s something on the other side,” she whispered.
Without warning, the door was manually thrown open with a physical force that shocked the gracile Sirens. From the impenetrable gloom beyond the door’s threshold, there emerged a grotesque figure the likes of which the Sirens had never seen before.
Its round torso was squat and bloated, vaguely resembling that of a frog’s. Its veiny, crimson hide was mottled in purple splotches from where those veins had broken. Four long limbs dangled down limply, each possessing five boney, claw-like digits. As with the Star Sirens, its pinky fingers had been repurposed into a second opposable thumb; but unlike them, its digits were arranged more radially so that its hands resembled starving sea stars. It possessed a prehensile tail as well, though closer in appearance to an opossum’s than the Siren’s simian tails.
It was the front of the creature that was most alien to them. It had no neck or even a head distinct from its bulging torso. It had two eyes on mobile stalks, each a bloodshot blue with a crescent-shaped pupil. There was a blowhole near the top of its vaguely defined head, and near the bottom hung a toothless proboscis, as prehensile as an elephant’s trunk.
All four Sirens broke out into screams at the sight of the deformed creature, jetting backward as quickly as they could. Wheezing, the creature lurched towards them, slowly raising its proboscis in the air as it did so.
Vici grabbed the bundle of air pods that Pomoko had released in her panic and began beating the creature over the top of the head with it. Though she possessed just barely enough physical strength to walk in nothing greater than Lunar gravity, her love for her sisters and her fear, disgust, and contempt for anything else drove her to assail the hideous being as hard as she could.
The creature groaned, though it seemed to be more of sorrow than of pain. Raising its arms up protectively while keeping its proboscis elevated, it slowly sunk down to the bottom of the corridor as Vici bashed away at it.
“Vici! Vici, stop!” Kali commanded, grabbing hold of her and pulling her back. “It’s not attacking us!”
She was right, of course. Despite its fearsomely unfamiliar form, it actually seemed rather pathetic as it lay quivering on the floor, making no sound aside from laboured and gasping breaths.
“Alien! It’s an alien!” Vici cried in dismay, scarcely believing her own eyes.
Though that improbable, if more palpable, explanation for the being’s origin may have seemed the most obvious, Kali felt a growing sense of horror well up inside her as the pieces started to click together. She glanced over at Akio who was rapidly reviewing the readings from her cyberdeck, and could tell from the revulsion on her face that she had reached the same conclusion.
“Preceptress; please say that it’s an alien,” she pleaded in a softly cracking voice.
Akio looked up at her with pity, and slowly shook her head.
“I’m sorry,” she said quietly. “But that, save for the skill and wisdom of Olympeon and the Grace of Cosmothea, is us.”
“It… it’s human?” Pomoko asked, floating up behind Kali and Vici and just barely daring to peek over their shoulders at the horrid beast.
“It’s bred from a human base, yes,” Akio explained. “Heavily modified, of course. Much more than ourselves, though nowhere near as adroitly. It’s a genetic chimera; probably because its embryo was cobbled together from multiple lines of modified cells. Its hide and at least a few of its major organs appeared to have been grown separately and grafted on in vivo. It’s literally a Frankenstein Monster.”
“What’s that old saying? Knowledge is knowing Frankenstein was the Doctor, not the monster; wisdom is knowing that Doctor Frankenstein was the monster,” Kali quoted, pitying the poor wretch that wallowed before her.
“Yeah. I think… I think that whoever made this was trying to make a new species of space-adapted humans, probably in the hopes of eventually surpassing us,” Akio speculated. “But it’s a failed experiment. All of its genomes are highly degraded and riddled with off-target mutations and poorly thought-out on-target ones. Its cells are barely functional, and it’s undergoing mass organ failure at this very moment.”
“It… he’s dying?” Kali asked softly.
“It was probably dying before it even decanted; it’s been held together with prayers and twine,” Akio explained.
“Good! It’s an abomination! It never should’ve existed in the first place!” Pomoko declared.
“Pomoko, shush!” Kali yelled, hot tears beginning to pool in her eyes. “Can… can he hear us?”
“It can hear, I think. Its brain size and neuronal density are actually over the optimal limit, and its neurochemistry and connectome are a complete mess,” Akio replied. “It’s probably an idiot savant, at best. It likely has some linguistic capability, but I don’t think it would be able to understand Sirensong. It doesn’t have any kind of speech organs or comm implant, either. Its digestive and respiratory systems are separate, and that blowhole doesn’t have any kind of syrinx.”
“In other words, he has no mouth and he must scream,” Kali lamented. “Did he escape, do you think?”
“It must have,” Akio nodded. “Pomoko may have been a bit insensitive just now, but she’s right. This thing’s a violation of multiple transnational laws, treaties and conventions. Its creators wouldn’t want anyone to know about it. It… it must have known that escaping its creators and whatever convoluted life-support system they were using to keep it alive would have meant a slow and painful death, but it did it anyway. All it could have hoped for was that someone would find it and be able to hold its creators accountable. We don’t understand enough about its anatomy to offer any meaningful assistance. The most we could do is prolong its suffering. I think we should just let it pass in peace; it shouldn’t take more than a couple of hours at most now. We’ll return to our shuttle, tell the fleet what we found, and then have the carcass put in cryostasis as evidence. We’ll send it and this vessel to Olympeon, and they’ll deal with it. They’ll find who’s responsible and bring them to justice.”
“Yeah, we need to get back to the shuttle immediately for decontamination and med-screening. We could be infected by whatever microbes and nanites they stuffed into this bloated wretch,” Pomoko said with barely restrained panic, jetting back to the airlock as quickly as she could.
Akio and Vici followed closely behind, but Kali lingered in place as she gazed at the creature’s proboscis, which it still held upright. She recalled that elephants on Earth would raise their trunks when they were dying, and that the ancient Romans, despite being one of the cruellest cultures of humans to exist, had still recognized this as a plea for mercy. Though the gulf between the two species was significant, one self-aware being could still recognize the suffering of another, and be moved to pity by it.
“I’m staying with him,” she announced softly.
“What?” Pomoko shouted, she and the others all spinning around to look at her in bewilderment.
“Until he passes. Akio said it wouldn’t be long,” Kali replied.
“Why?” Vici asked.
“So he doesn’t die alone!” Kali screamed.
Pomoko started jetting back towards her friend, but Akio caught her and gently shook her head in refusal. She silently ushered the two of them back through the airlock and, with some reluctance, left Kali alone with the dying creature.
Kali tenderly took hold of the being’s trunk with her left hand, compassionately petting it with her right. He shuddered slightly, letting go of a noticeable amount of tension in his malformed body. Snorting from his blowhole, he focused his teetering eyestalks up at her, and she could see in those eyes a great, crushing sorrow, both from the suffering he had endured and the lost potential of the life he could have had if fate had been kinder.
A life like the one Kali had led as a privileged and well-bred daughter of Olympeon, and would most likely go on to live for many centuries more.
The tears in her eyes reached a critical mass now, budding off into tiny orbs and floating out into the air.
“I’m sorry. I’m sorry,” she sobbed. It was all she could think to say, and she said it in English, hoping there was a better chance of him understanding it than her native language.
Remarkably, he reacted by raising the flat palm of his right hand up to the space beneath his trunk – a struggle for him even in the absence of gravity – and then lowered it with the palm facing up and out. Kali wasted no time in running the gesture through her exocortexes, frantic to decipher what the creature could be trying to tell her before it was too late.
It was sign language for ‘thank you’.

The slender and feminine frames of the four Star Sirens floated with an inhuman ease in the microgravity of their shuttle’s cabin, their prehensile feet and tails either dangling freely or clutching an opalescent perching rod. They stared with a novel curiosity out their window towards the small and relatively unsophisticated Earthly craft that had gradually been drifting its way towards their fleet.
“It’s still not answering hails, and I can’t find any sort of transponder or visual identification,” Akioneeda, the eldest of the group, sang in their musical and surgically precise language; the chevron-shaped slits over her trachea granting her a superhuman vocal range.
Using the glittering diodes embedded throughout her mauve skin, she fired jets of light to propel herself over to a crystalline computer terminal on the other side of the cabin.
“Why do they have to make their ships so ugly?” the magenta-skinned Pomoko asked; her large and bright cat-like irises constricting in their dark sclera as she squinted at the foreign craft in disdain.
Its design was a smoothly contoured rocket, with a rounded nose and a flaring aft that allowed it to hold both rear and forward-facing thrusters. Its dark hull was nearly invisible against the black of space, and coated in a radar-absorbent material that until recently had masked its approach. The Siren’s shuttle, in contrast, was a luminescent, bright-pink spiral seashell nestled in an array of gossamer-like radiators, sails, and solar panels that resembled blooming flower petals.
“I think the polite word is ‘spartan’,” the violet-skinned Kaliphimoa corrected her with an excited grin. The crystalline, oval exocortexes embedded on the sides of her elongated skull began flickering as she began reviewing any information that she thought might be pertinent. “Macrogravitals have a much harder time surviving in space than we do, so they have to be fairly pragmatic in the designs of their vessels. And remember that, unlike our ships, that rocket is meant to launch from and land on planets, so it has to be pretty rugged.”
“Kali, there can’t be any Macrogravitals on that thing; there’s no centrifuge,” the Cyan-skinned Vicillia pointed out. “Macrogravitals need macrogravity. It’s literally their defining characteristic.”
“They don’t die in microgravity, Vici,” Kali said with a roll of her eyes. “In olden times, baseline humans would spend months, sometimes even over a year living in space with no artificial gravity at all.”
“This isn’t the Apollo & Artemis Era, Kali. It’s virtually unheard of for Macrogravitals to leave cislunar space without a centrifuge,” Akioneeda said as she examined the telemetry on the intruding object. “That thing definitely has a habitat module, but Earth is on the other side of the sun right now. That’s weeks of travel, and that’s if its fusion rockets are functional. And it is a ship, not a habitat. Something like that is meant primarily for ground-to-orbit transport, and in a pinch travelling between the inner planets during optimal launch windows. It’s not intended to be lived in for prolonged periods of time. I don’t think it came here on purpose. It must have gotten knocked out of orbit and just found its way here. I wish I could tell for sure if there was someone inside, but its mini-magnetosphere is really scattering the sensor beams.”
“But doesn’t its magnetosphere mean there must be Macrogravitals inside?” Pomoko asked. “Even normal cosmic radiation is dangerous to humans without our enhanced DNA repair and chromamelanin, isn’t it?”
“They might have died before they had a chance to shut it off,” Kali suggested as tactfully as she could. “If there are bodies in there, we should recover them and send them back to Earth.”
“Wait a minute. It’s pretty suspicious that there’s no transponder or identifying markings on the craft, isn’t it?” Vici asked. “This could be a trap or terrorist attack of some kind.”
“An attack? Why would anyone want to attack us?” Pomoko asked in dismay.
“They wouldn’t. She’s being paranoid,” Kali said dismissively as she comfortingly slid her arm around her. “Vici, save your racist horror stories for when we’re not within visual distance of an Earth vessel, okay?”
“Reavers are real! Macrogravitals brains get cooked by cosmic radiation and they go crazy!” Vici insisted.
“Reavers are most definitively not real, Vicillia. Nonetheless, we probably shouldn’t rule out the possibility of an attack,” Akioneeda conceded. “Star Sirens now make up the majority of all humans permanently living off-world, and that’s not a lead we’re ever likely to lose. We’ve only been around a hundred years or so, and there are already over two million of us. We breed like rabbits.”
“That’s because we screw like rabbits,” Vici said lasciviously, only to incur glares of confusion from the others. “Well, not directly, since we don’t reproduce naturally, but it’s good for our esprit de corps, right girls?”
“The point being, there are factions on Earth who view our current and forecasted success as a threat to their own potential expansion into space,” Akioneeda continued, failing to hide her annoyance at the younger Siren’s interruption.
“That’s backwards. Macrogravitals evolved to live on planets, and we were literally made to colonize space,” Pomoko objected. “Why shouldn’t we breed like rabbits? The solar system, the galaxy, the universe should be filled with as many Star Sirens as they can sustain!”
“And they will be – eventually. But if we prioritize our long-term survival over the near term, we might not have a future to prioritize,” Akioneeda gently reminded her. “Steady, safe, and sustainable growth is better than fast and risky growth. We don’t want to spook anyone down on Earth into doing something that might hurt us, which is why we have to abide by the Solaris Accords.”
“Exactly! We’re signatories of the Solaris and Orion Accords, which we’ve always been in complete compliance with,” Kali said. “We’ve already lowered our population growth to two percent per annum, and have agreed to lower it to point four percent when we hit two billion. Anyone attacking us over that would be in violation of the Accords and incur the wrath of every other signatory, including Olympeon, of which we are still a protectorate.”
“Ugh. Don’t remind me that we’re technically compatriots with Macrogravitals,” Vici said in disgust.
“Vicillia, a little respect please for our creators and allies,” Akioneeda reprimanded her.
“I gratefully respect them, Preceptress Akio, because no one able to launch this ship out to us would ever do something so suicidally foolish as commit an act of war against Olympeon,” Kali insisted.
“You make valid points, Kali, and I’m not saying it’s likely this is an attack, but we should still proceed with caution,” Akioneeda reiterated. “At the very least, the scanner still has enough resolution to rule out the possibility of there being any potential high-yield explosives on the vessel. I think it’s worth the risk to jet over and see what’s inside; if that’s something you girls would be interested in?”
“Yes, preceptress,” Kali and Vici said in unison, each immediately assuming an attentive posture with their hands behind their backs as they nodded politely, eager for the opportunity to explore a non-Siren spacecraft. Pomoko, however, joined in a little more reticently, and solely because she didn’t want to upset her companions.
Unlike Vici, she never told stories about Macrogravitals driven into mad savagery by the harshness of space, because she found them unbearably terrifying.
The four of them filed into the airlock and grabbed a lungful of air before depressurizing, the short siphons at the base of their necks cinching shut to hold it in. The only things they brought with them were a small bundle of additional air pods and a field kit, both of which were carried by Pomoko.
The enhanced proteins and nanofiber weaves in their bare skin rendered them impervious to vacuum exposure, and their eyes were protected by transparent graphene lenses. Hundreds of small jets of light from all over their bodies propelled them across the gap between their shuttle and the errant vessel, with Kali and Vici taking advantage of the vast open space to perform challenging acrobatic maneuvers.
Akio was the first to arrive at the foreign spacecraft, circling it several times for any signs that might give her some idea about what it was and what it was doing there, but found none. She even peered into a porthole, but could see nothing of note in the darkened interior.
When she reached the airlock, she gestured for Pomoko to hand her a small but rugged cyberdeck from the field kit. While her exocortexes possessed more computing power than she could ever need, the cyberdeck contained a compact suite of sensor arrays for environmental analysis, as well as antennas and ports for electronic interfaces. Syncing the device with her own exocortexes, a holographic AR display projected itself on her bionic lenses.
It didn’t take long for her to find a frequency to engage with the airlock control mechanism, and even less time to find a skeleton key that could best that woefully inadequate security system. As the outer door of the airlock dilated open, Akio signalled for Kali and Vici to rejoin them, and they all funnelled into the ship together. The outer door snapped behind them, sealing them in complete darkness that was staved off solely by their photonic diodes until some emergency lights began to flicker on and off at random intervals.
As the airlock slowly began to repressurize, the Sirens – who were accustomed to an atmosphere maintained at conditions optimal for them - shuddered slightly at the feeling of foreign air creeping up against their skin.
“The air’s acceptable. It’s a standard oxygen/nitrogen mix with no detectable toxins or pathogens present,” Akioneeda assured them as she opened her siphons and exhaled the breath she had been holding since they left their own shuttle. “CO2’s a little high, but not dangerous.”
“Doesn’t high CO2 mean there’s someone here?” Pomoko asked, nervously looking about in all directions as she clutched her supplies close to her.
“Not necessarily. I’m not detecting any human environmental DNA,” Akio replied confidently. “I am however sampling some environmental DNA that doesn’t match anything on file. It might take some time to analyze it enough to make any sense of it. The power system is failing, which is why the lights aren’t working right. The electrical surges are generating enough EM interference that the sensor beam is still pretty scattered, so I can’t see much through the bulkheads. Keep your diodes lit up bright and stay alert.”
The shadowy main corridor was hexagonal in shape, spanning several meters across and roughly twenty-five meters from end to end. It was broken into six segments, with every other segment containing a pair of hexagonal doorways across from one another, along with a door at each end of the corridor.
“The door next to us should be the engine module, and the one at the other end should be the command and communications center,” Akio said, opening the door to the engine room and sticking her cyberdeck inside. “I’m going to do a quick scan of each room before we start rummaging through everything, so don’t go sticking your tails anywhere they don’t belong until I’m done.”
The other three Sirens all nodded obediently, and limited their exploration of the ship to a solely visible inspection. None of them were used to being in low light conditions, and their pupils were dilated so much they were nearly round. Though their visual acuity was raptor-like in its detail and they could see into the ultra-violet spectrum, night vision had not been a priority when they had been designed. Nonetheless, their large eyes and vertical pupils still let them see better in the dark than any unmodified human.
“The writing is Cyrillic, but everything I can see is just basic labels. I can’t tell for certain which language it is,” Kali said. “That doesn’t mean much though. This thing is definitely second-hand, likely even stolen. That would explain the lack of identification. Maybe whoever stole it got spooked and just set it adrift.”
“So, it’s a pirate ship then?” Pomoko asked, sounding slightly relieved. “That’s better than terrorists, or Reavers.”
“It is not. We’re space mermaids. Space pirates are our natural enemies,” Vici claimed. “If they catch us, they’ll pry the exocortexes from our skulls and pluck out our photonic diodes one by one, then bind us to the front of the ship as figureheads.”
“Vicillia, that is enough!” Akio reprimanded her as she scanned the next room. “Stop trying to scare her! Kali’s right. This is an old ship that’s been stripped of nearly every non-essential piece of equipment. Someone stole it, and then abandoned it when the authorities started closing in. That’s it. There’s not a raiding party of pirates hiding behind one of these doors.”
“Famous last words,” Vici muttered, defensively folding her arms across her chest.
Kali once again put her arm around Pomoko in comfort and gave her a loving kiss on the head.
The glowing, sylph-like Sirens continued floating through the dim and unevenly lit corridor like ghosts, checking one room after another and finding nothing of note until they finally reached the end.
“Now that we’re done checking for pirates, we can focus on the command center,” Akio announced. “Assuming they haven’t been wiped, we’ll check the ship’s logs and records for evidence of its origin and how it got here. If it was stolen, we’ll send it to Pink Floyd Station and they can deal with it. Otherwise, we’ll be free to keep it as salvage.”
She raised her finger to tap the AR command to open the door, but suddenly hesitated.
“What is it?” Kali asked.
Akio squinted at her HUD display in alarm, but seemed reluctant to answer.
“There’s something on the other side,” she whispered.
Without warning, the door was manually thrown open with a physical force that shocked the gracile Sirens. From the impenetrable gloom beyond the door’s threshold, there emerged a grotesque figure the likes of which the Sirens had never seen before.
Its round torso was squat and bloated, vaguely resembling that of a frog’s. Its veiny, crimson hide was mottled in purple splotches from where those veins had broken. Four long limbs dangled down limply, each possessing five boney, claw-like digits. As with the Star Sirens, its pinky fingers had been repurposed into a second opposable thumb; but unlike them, its digits were arranged more radially so that its hands resembled starving sea stars. It possessed a prehensile tail as well, though closer in appearance to an opossum’s than the Siren’s simian tails.
It was the front of the creature that was most alien to them. It had no neck or even a head distinct from its bulging torso. It had two eyes on mobile stalks, each a bloodshot blue with a crescent-shaped pupil. There was a blowhole near the top of its vaguely defined head, and near the bottom hung a toothless proboscis, as prehensile as an elephant’s trunk.
All four Sirens broke out into screams at the sight of the deformed creature, jetting backward as quickly as they could. Wheezing, the creature lurched towards them, slowly raising its proboscis in the air as it did so.
Vici grabbed the bundle of air pods that Pomoko had released in her panic and began beating the creature over the top of the head with it. Though she possessed just barely enough physical strength to walk in nothing greater than Lunar gravity, her love for her sisters and her fear, disgust, and contempt for anything else drove her to assail the hideous being as hard as she could.
The creature groaned, though it seemed to be more of sorrow than of pain. Raising its arms up protectively while keeping its proboscis elevated, it slowly sunk down to the bottom of the corridor as Vici bashed away at it.
“Vici! Vici, stop!” Kali commanded, grabbing hold of her and pulling her back. “It’s not attacking us!”
She was right, of course. Despite its fearsomely unfamiliar form, it actually seemed rather pathetic as it lay quivering on the floor, making no sound aside from laboured and gasping breaths.
“Alien! It’s an alien!” Vici cried in dismay, scarcely believing her own eyes.
Though that improbable, if more palpable, explanation for the being’s origin may have seemed the most obvious, Kali felt a growing sense of horror well up inside her as the pieces started to click together. She glanced over at Akio who was rapidly reviewing the readings from her cyberdeck, and could tell from the revulsion on her face that she had reached the same conclusion.
“Preceptress; please say that it’s an alien,” she pleaded in a softly cracking voice.
Akio looked up at her with pity, and slowly shook her head.
“I’m sorry,” she said quietly. “But that, save for the skill and wisdom of Olympeon and the Grace of Cosmothea, is us.”
“It… it’s human?” Pomoko asked, floating up behind Kali and Vici and just barely daring to peek over their shoulders at the horrid beast.
“It’s bred from a human base, yes,” Akio explained. “Heavily modified, of course. Much more than ourselves, though nowhere near as adroitly. It’s a genetic chimera; probably because its embryo was cobbled together from multiple lines of modified cells. Its hide and at least a few of its major organs appeared to have been grown separately and grafted on in vivo. It’s literally a Frankenstein Monster.”
“What’s that old saying? Knowledge is knowing Frankenstein was the Doctor, not the monster; wisdom is knowing that Doctor Frankenstein was the monster,” Kali quoted, pitying the poor wretch that wallowed before her.
“Yeah. I think… I think that whoever made this was trying to make a new species of space-adapted humans, probably in the hopes of eventually surpassing us,” Akio speculated. “But it’s a failed experiment. All of its genomes are highly degraded and riddled with off-target mutations and poorly thought-out on-target ones. Its cells are barely functional, and it’s undergoing mass organ failure at this very moment.”
“It… he’s dying?” Kali asked softly.
“It was probably dying before it even decanted; it’s been held together with prayers and twine,” Akio explained.
“Good! It’s an abomination! It never should’ve existed in the first place!” Pomoko declared.
“Pomoko, shush!” Kali yelled, hot tears beginning to pool in her eyes. “Can… can he hear us?”
“It can hear, I think. Its brain size and neuronal density are actually over the optimal limit, and its neurochemistry and connectome are a complete mess,” Akio replied. “It’s probably an idiot savant, at best. It likely has some linguistic capability, but I don’t think it would be able to understand Sirensong. It doesn’t have any kind of speech organs or comm implant, either. Its digestive and respiratory systems are separate, and that blowhole doesn’t have any kind of syrinx.”
“In other words, he has no mouth and he must scream,” Kali lamented. “Did he escape, do you think?”
“It must have,” Akio nodded. “Pomoko may have been a bit insensitive just now, but she’s right. This thing’s a violation of multiple transnational laws, treaties and conventions. Its creators wouldn’t want anyone to know about it. It… it must have known that escaping its creators and whatever convoluted life-support system they were using to keep it alive would have meant a slow and painful death, but it did it anyway. All it could have hoped for was that someone would find it and be able to hold its creators accountable. We don’t understand enough about its anatomy to offer any meaningful assistance. The most we could do is prolong its suffering. I think we should just let it pass in peace; it shouldn’t take more than a couple of hours at most now. We’ll return to our shuttle, tell the fleet what we found, and then have the carcass put in cryostasis as evidence. We’ll send it and this vessel to Olympeon, and they’ll deal with it. They’ll find who’s responsible and bring them to justice.”
“Yeah, we need to get back to the shuttle immediately for decontamination and med-screening. We could be infected by whatever microbes and nanites they stuffed into this bloated wretch,” Pomoko said with barely restrained panic, jetting back to the airlock as quickly as she could.
Akio and Vici followed closely behind, but Kali lingered in place as she gazed at the creature’s proboscis, which it still held upright. She recalled that elephants on Earth would raise their trunks when they were dying, and that the ancient Romans, despite being one of the cruellest cultures of humans to exist, had still recognized this as a plea for mercy. Though the gulf between the two species was significant, one self-aware being could still recognize the suffering of another, and be moved to pity by it.
“I’m staying with him,” she announced softly.
“What?” Pomoko shouted, she and the others all spinning around to look at her in bewilderment.
“Until he passes. Akio said it wouldn’t be long,” Kali replied.
“Why?” Vici asked.
“So he doesn’t die alone!” Kali screamed.
Pomoko started jetting back towards her friend, but Akio caught her and gently shook her head in refusal. She silently ushered the two of them back through the airlock and, with some reluctance, left Kali alone with the dying creature.
Kali tenderly took hold of the being’s trunk with her left hand, compassionately petting it with her right. He shuddered slightly, letting go of a noticeable amount of tension in his malformed body. Snorting from his blowhole, he focused his teetering eyestalks up at her, and she could see in those eyes a great, crushing sorrow, both from the suffering he had endured and the lost potential of the life he could have had if fate had been kinder.
A life like the one Kali had led as a privileged and well-bred daughter of Olympeon, and would most likely go on to live for many centuries more.
The tears in her eyes reached a critical mass now, budding off into tiny orbs and floating out into the air.
“I’m sorry. I’m sorry,” she sobbed. It was all she could think to say, and she said it in English, hoping there was a better chance of him understanding it than her native language.
Remarkably, he reacted by raising the flat palm of his right hand up to the space beneath his trunk – a struggle for him even in the absence of gravity – and then lowered it with the palm facing up and out. Kali wasted no time in running the gesture through her exocortexes, frantic to decipher what the creature could be trying to tell her before it was too late.
It was sign language for ‘thank you’.
____________________________________________
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