BYJU’S Clarifies on Term Loan B Controversy: Funds Safely with Non-US Subsidiary

• ByStartupStory     |    March 6, 2024

In response to accusations of fund misappropriation, BYJU’S issued a statement on Tuesday, asserting that the $1.2 billion Term Loan B (TLB) proceeds are securely held by its non-US wholly-owned subsidiary. The controversy arose when fund manager Camshaft, appointed by BYJU’S to oversee TLB, disclosed that the funds were transferred to a 100% subsidiary of BYJU’S.

“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,” stated Think and Learn, the entity operating under the BYJU’S brand.

BYJU’S clarified that the initial fund transfer occurred from BYJU’S Alpha, a special purpose vehicle incorporated in Delaware, to Inspilearn, another US-based fully-owned subsidiary. From there, the funds were transferred to Camshaft and subsequently to a non-US-based fund. Recent advice from legal counsel led to the funds being moved from Inspilearn to a non-US-based 100% subsidiary of BYJU’S.

The company emphasized that BYJU’S Alpha was never an operating entity, serving only to receive and disburse funds within the group. Under the loan agreement, there were no restrictions on fund use, except for regulatory reasons preventing funds from being brought to India.

BYJU’S defended itself against loan default allegations, stating it never missed any interest payments. The lenders, seeking better terms, accelerated the loan in March 2023, relying on contested ‘events of default,’ including the failure of Indian subsidiary Whitehat to act as an additional guarantor due to regulatory changes. BYJU’S is confident in challenging the acceleration’s validity in the New York Supreme Court and the Delaware Supreme Court.

Lenders, representing over 80% of the TLB, have filed an insolvency petition with the NCLT Bangalore. BYJU’S dismissed these claims as “premature and baseless,” while lenders are utilizing Delaware bankruptcy law tools to obtain information on BYJU’S assets.

The case has been filed through Glas Trust Company, representing institutional lenders in the TLB instead of traditional banks.

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