‘This should dispel suggestion that funds are siphoned off’: Byju’s says TLB funds lying with non-US subsidiary

Byju’s crisis: Byju Raveendran-headed edtech giant Byju’s, that is currently caught in the eye of a storm with investors seeking to oust the founder-CEO, has issued a clarification on the whereabouts of its Term Loan B funds. The company said that the proceeds from disputed $1.2 billion Term Loan B are lying with its non-US based wholly-owned subsidiary.

Fund manager Camshaft that was appointed by Byju’s to manage its TLB funds had also revealed the similar details in a Delaware bankruptcy court this week. The company as well as the fund manager had said that the money was transferred to a 100 per cent subsidiary of Byju’s.

In a statement by Byjus on the Delaware court proceedings, the edtech firm said that Camshaft is no longer managing the funds. It explained that Byju’s had incorporated an SPV to receive loans from US-based lenders and to disburse them through the group, which was its “sole role”. It explained that there is no restriction on the usage of the funds but at the same time, it cannot be brought to India due to regulatory reasons. 

Byju’s has never defaulted on any interest payment under the loan but the lenders accelerated the loan in March “in an attempt to extract better and unbargained-for terms”. “They relied on concocted non-monetary “events of default”, such as the failure of one of Byju’s Indian subsidiaries, 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,” Byju’s said. It said that it is confident of proving that the acceleration was invalid. 

However, lenders took control of Byju’s Alpha in the meantime by “purporting to replace Byju’s nominee with their own designee”, it said. Lenders are now attempting to gain information about Byju’s assets, including any cash holdings in the US, by using the discovery tools under the Delaware bankruptcy law, the statement added.

It also clarified that Camshaft was initially appointed by Byju’s Alpha to manage its funds and that there is “nothing improper” about this. The funds were transferred from Byju’s Alpha to Inspilearn in early 2023. Inspilearn is another US-based fully-owned subsidiary of Byju’s. The funds were then transferred to a non-US based fund. “More recently, and on receipt of advice from counsel, those funds have been transferred from Inspilearn to a non-US based 100% subsidiary of Byju’s,” it said.

It added that Camshaft’s disclosure at the Delaware bankruptcy court 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,” it said.