Funds from TLB lying with non-US subsidiary, says BYJU'S

Dispelling charges of siphoning off funds, edtech major BYJU'S on Tuesday said the proceeds from disputed $1.2 billion Term Loan B are lying with its non-US based wholly-owned subsidiary.

Fund manager Camshaft, appointed by BYJU'S to manage Term Loan B fund, in its disclosure to the Delaware bankruptcy court earlier this week, said the money was transferred to a 100% subsidiary of BYJU'S.

BYJU'S had taken a loan from certain US-based lenders in November 2021. For that purpose, an SPV named BYJU'S Alpha was incorporated in Delaware in which the loan amount was transferred.

BYJU'S TLB lenders have alleged that the company has siphoned off around $533 million by moving the fund out of BYJU'S Alpha, which the edtech major has contested.

BYJU'S Alpha initially appointed Camshaft to manage its funds. The company said that disclosure by Camshaft is consistent with BYJU'S position that the group entities remained the beneficiary holders of the money.

"The above disclosure should also dispel any suggestion that these funds are being siphoned off. BYJU'S has consistently maintained that its group entities remain (and continue to remain) the beneficial holders of these funds," Think and Learn, which operates under BYJU'S brand, said in a statement.

The edtech firm said that there are no covenants in the loan agreement requiring cash or other collateral to be held by BYJU'S Alpha at any point in time.

"In early 2023, the funds were transferred from BYJU'S Alpha to Inspilearn, another US-based fully-owned subsidiary of BYJU'S. Inspilearn, thereafter, transferred those funds from Camshaft to a non-US based fund," the statement noted.

BYJU'S said that based on receipt of advice from counsel, recently those funds have been transferred from Inspilearn to a non-US-based 100% subsidiary of BYJU'S.

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The company said that BYJU'S Alpha was never an operating company, and its sole role was to receive funds and then disburse them through the group.

The company said under the loan agreement, there is no restriction on the use of funds, except that for regulatory reasons, the funds cannot be brought to India.

BYJU'S said that it never defaulted on any interest payment under the loan but still, in an attempt to extract better and unbargained-for terms, the lenders accelerated the loan in March 2023.

The company said that the lenders relied on "concocted" non-monetary 'events of default', such as the failure of one of BYJU'S Indian subsidiary Whitehat to accede to the loan agreement as an additional guarantor.

"That is the case even though it had become legally impossible for Whitehat to provide the additional guarantee due to amendments to certain RBI regulations that came into effect in August 2022. This is currently contested in the New York Supreme Court, and the Delaware Supreme Court, and BYJU'S is confident that it will succeed in showing that the acceleration was invalid," the statement said.

The edtech firm said lenders are now using discovery tools available under Delaware bankruptcy law to gain information about BYJU'S assets, including any cash holdings in the US.

The majority of lenders, who were part of $1.2 billion Term Loan B (TLB) secured by BYJU'S, have filed an insolvency petition with the NCLT Bangalore against the company, according to people aware of the development.

While the filing has not been made public yet, BYJU'S has termed the claims as "premature and baseless".

The case has been filed through Glas Trust Company, which represents over 80% of lenders that were part of the TLB loan, which is granted by institutional lenders instead of banks.