Byju’s transfers $533 million to non-US subsidiary, Camshaft no longer in charge

The development comes after the funds became a subject of litigation between the company and its overseas lenders. 

The funds, which were briefly under the management of Camshaft founder William Morton, have been under the spotlight owing to a series of disputes with lenders and allegations of concealment, which could translate to potential jail time for Morton, according to a Bloomberg News report.

Byju’s Alpha, the US-based subsidiary of the edtech company, had initially appointed Camshaft to handle its funds. The funds from Camshaft were first transferred to another fully owned US subsidiary of Byju’s, Inspilearn, and from there to a fund based outside the US, Byju’s said. 

Earlier this week, Camshaft also confirmed in a disclosure to the Delaware bankruptcy court that the money had been transferred to a 100% subsidiary of Byju’s.

“The above disclosure should also dispel any suggestion that these funds are being syphoned off. Byju’s has consistently maintained that its group entities remain (and continue to remain) the beneficial holders of these funds,” the company said in a statement on the Delaware court proceedings on Tuesday.

In November 2021, Byju’s had taken a $1.2 billion loan from lenders in the US and created a special purpose vehicle–Byju’s Alpha–that was incorporated in Delaware. Byju’s Alpha was never an operating company – it was created solely to receive the funds and distribute them through the group.

“There was nothing improper about this: there are no covenants in the loan agreement requiring cash or other collateral to be held by Byju’s Alpha at any point of time,” the company said.

Byju’s also said there were no restrictions on the use of funds under the loan agreement, barring regulatory reasons for why the funds couldn’t be brought to India.

The fund transfer has not gone down well with Byju’s lenders, who see it as a violation of the terms of the loan agreement, and are taking legal action to recover the money.

Over the past year, the company has been embroiled in several legal battles regarding the $1.2 billion loan as lenders accelerated the pace of repayments after one of Byju’s Indian subsidiaries, Whitehat, failed to accede to the loan agreement as an additional guarantor.

These lenders have also taken control of Byju’s Alpha by “purportedly” replacing Byju’s nominee with their own designee, and 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 company said. 

“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,” it added.

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Published: 05 Mar 2024, 05:59 PM IST