BYJU’S allegedly hid $533M lenders claim in lawsuit; Co denies being party to proceedings

Edtech firm BYJU'S allegedly hid $533 million in a hedge fund—Camshaft Capital Fund—founded by William C Morton, some of the Term Loan B (TLB) lenders have claimed in a lawsuit, according to a media report.

“BYJU’S entities are not parties to the proceedings mentioned in the recent media reports, and have not been served with copies of the complaint or motion. This is the first that we are hearing of these proceedings," said BYJU’S spokesperson in response.

According to a Bloomberg report, the edtech firm transferred over half a billion dollars to Morton’s fund last year. These allegations add to the ongoing public dispute between BYJU'S and its lenders who assert that the $533 million is collateral for a $1.2-billion loan.

The loan in question was raised by BYJU’S Alpha, a wholly-owned subsidiary of the edtech firm, in November 2021.

BYJU’S said an offshore subsidiary remains the beneficiary of the money invested in high security fixed income instruments invested with a multi-hundred billion dollar fund in the US. The company categorically denied media reports which insinuated that BYJU’S was no longer a beneficiary owner of the funds. 

"BYJU’S would like to emphasise that its credit agreement with the lenders does not prohibit or restrict the usage, movement or investment of funds disbursed thereunder," the edtech company stated.

"As a commercially prudent borrower and like any other large corporate treasury, in compliance with the credit agreement, BYJU’S has safe-guarded the referenced funds with the global fund. Furthermore, contrary to the false allegations, BYJU’S would like to clarify that there is no requirement to maintain cash as collateral for the lenders under the credit agreement," it noted.

BYJU'S added that the Delaware court ruling in June this year rejected the lenders’ application for information in relation to the amount in question i.e. part of the funds received by BYJU'S Alpha, the borrowing entity under the TLB.

The company referred to when a Delaware court rejected a request by BYJU'S' TLB lenders in June to investigate into $500 million transfer from BYJU'S Alpha to other entities.

TLB Lenders, through its agent, GLAS Trust Company, have filed a lawsuit against BYJU'S' US-based subsidiary for moving out $500 million from BYJU'S Alpha and on other issues around TLB.

The Bengaluru-based company has been working to reach an agreement with creditors to restructure the facility. At the time, this was the largest TLB placement by an Indian startup, although the loan was unrated.

"The efforts of BYJU’S has been in good faith to continue engaging in negotiations to settle the dispute, and it remains committed to an amicable outcome. The recent reportage by media appears maliciously instigated, and we strongly condemn these instigations which seek to destabilise a company that is attempting a turnaround," the company said in a statement.

Earlier this week, BYJU’S proposed an accelerated repayment plan to its lenders, offering to fully repay its $1.2-billion TLB within six months, sources told YourStory. BYJU'S is also considering the sale of two assets, Epic and Great Learning, to generate over $800 million as part of its efforts to repay the TLB debt owed to its lenders, they added.

For nearly a year, both BYJU’S and its lenders have been embroiled in a conflict with multiple rounds of negotiations aimed at amending the TLB agreement. It was expected that BYJU’S and its lenders would finalise a term loan amendment before August 3, 2023.

(The copy was updated to add a statement from BYJU'S.)