BYJU’S Says Funds Parked In High-Security Fixed Instruments As Lenders Brouhaha Over ‘Missing’ $533 Mn

After reports claimed that BYJU’S parked $533 Mn worth of proceeds from its term loan B (TLB) in an obscure hedge fund, the edtech major has shot back saying that its offshore subsidiary continues to remain the beneficiary of the funds. 

In a statement, BYJU’S said that the money, amounting to $533 Mn, has been invested in high security fixed income instruments.

“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 edtech major said. 

The company also ‘categorically’ denied media reports, which it said ‘insinuated’ that BYJU’S was no longer a beneficiary owner of the funds. Citing credit agreements with the lenders, the troubled startup emphasised that the pact did not bar or restrict the usage, movement or investment of TLB funds. 

“… 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,” a BYJU’S spokesperson added. 

This comes hours after Bloomberg reported that BYJU’S’ lenders alleged before the Miami-Dade County Court in Florida that the edtech company hid the capital in an obscure hedge fund, Camshaft Capital Fund, which is based out of a building that houses an IHOP restaurant.

Terming the reportage ‘maliciously instigated’, the edtech major said that such allegations sought to destabilise the company ‘attempting a turnaround’. BYJU’S also reiterated its stance saying that it continues to engage in negotiation to settle the dispute with an amicable outcome. 

At the heart of the matter is the ongoing legal tussle between the edtech giant and its TLB lenders. The crisis erupted earlier this year after Glas Trust, the agent representing the lenders,  took charge of BYJU’S Alpha and found funds in excess of $500 Mn missing from the subsidiary. 

Subsequently, the lenders initiated a legal action in a Delaware court. During the court proceedings, BYJU’S counsel claimed that the money was transferred to protect it from ‘predatory lenders’ and that the loan agreement permitted such a transfer. Eventually, the court sided with BYJU’S and quashed the lenders’ plea to initiate a probe into the transfer. 

Meanwhile, the lenders have now moved a Florida court seeking to recover the money and any excess management fees paid to Camshaft. 

Amid all this, lenders have also raised questions over the choice of Camshaft, which also caters to smaller clients, accepting funds as little as $50,000. The creditors claim that this was an ‘extremely low threshold’ for a hedge fund. The fund also appears to have moved its principal business address several times over the past three years. 

In a 2020 Securities and Exchange Commission (SEC) filing, Camshaft listed its address as 1285 NW 42nd Ave. However, separate filings related to both Camshaft and its subsidiaries indicate different addresses located in Florida and the Virgin Islands.

This comes days after the edtech company presented lenders with a proposal to buy back the loan within six months. Alongside, it also appears to have commenced talks to sell its US-based subsidiaries, Epic! and Great Learning Inc., to raise about $1 Bn to repay the debt.