Byju’s denies lenders’ allegations of hiding $533 million with a hedge fund

Ed-tech unicorn Byju’s has refuted accusations that it syphoned off funds to the tune of $533 million to a US-based hedge fund, capital that was allegedly supposed to be kept as collateral for a $1.2 billion worth Term B Loan it is struggling to repay.

“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. 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,” the company said in a statement.

Byju’s invested part of the funds it received from US-based lenders in an “obscure three-year-old hedge fund” called Camshaft Capital Fund, lenders have alleged in a fresh lawsuit filed in Florida’s Miami, Bloomberg reported on Wednesday.

“Byju’s has gone to great lengths to conceal the whereabouts of borrower’s $533 million for the admitted purpose of hindering and delaying”, they argued in Miami-Dade County court filings, according to the Bloomberg report.

The hedge fund, which lenders claimed specialises in small ticket investments, has also been accused of not having enough experience in investing. They claimed that the fund splurged on luxury cars pursuant to receiving the money. However, Byju’s in its statement said that Camshaft is a “multi-hundred billion dollar fund in the US” and that it safe-guarded the referenced funds with the global fund, which is not a deviation from the loan agreement.

Byju’s has also denied claims that it was no longer the beneficiary owner of these funds, adding that its offshore subsidiary remains the beneficiary of the money invested in “high security fixed income instruments” through Camshaft. The subsidiary in question is Byju’s Alpha, the company’s US-based borrowing entity under the Term Loan B.

Lenders of the loan had earlier in June filed a lawsuit in Delaware requesting the court to open an investigation into a $500 million fund transfer that the company had made to other entities. They had also sought to place their representative at the helm of Byju’s Alpha, along with control of its financial accounts. While the court declined to open an investigation into the transaction, a trial is expected to be held later this year to decide the subsidiary’s ownership.

Highlighting the court’s ruling in its favour, Byju’s noted that the media reports are hindering its attempts to regain lost fortunes.

“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,” it said in a statement.

The news of the fresh lawsuit came on the heels of Byju’s proposal to amend the TLB on Tuesday, offering to pay back the money within the next six months. The two parties have been unable to reach an agreement since Byju’s failed to pay $40 million in interest that was due in June. The company is reportedly looking to sell some of its overseas assets to private investors in an effort to make the freshly proposed repayment.

“The court filing appears to have been made prior to the latest loan repayment proposal,” a Byju’s spokesperson said. The company has also stated that it is not party to the Florida proceedings and has not received any copies of the lawsuit.