Byju's Denies Report Accusing It Of Concealing $533 Million In Hedge Fund

In the latest development in the ongoing dispute between Byju's and its lenders, a report on Wednesday alleged that the Byju's US subsidiary concealed $533 million in a relatively unknown hedge fund

Byju's on Wednesday refuted accusations that its US subsidiary, Alpha Inc concealed $533 million within an obscure hedge fund. The company clarified that this transaction was completely in compliance with its credit agreement with lenders. The company said the agreement allows for the movement and investment of funds disbursed under its terms, without any restrictions or limitations.

“As a commercially prudent borrower and like any other large corporate treasury, Byju’s Alpha has made investments in a multi-hundred billion dollar fund with high security fixed income instruments. Our Credit Agreement with the lenders does not prohibit or restrict the movement or investment of monies disbursed thereunder. There is no requirement for Byju’s to maintain cash as collateral,” a Byju’s spokesperson told CNBC TV18. 

In the latest development in the ongoing dispute between Byju's and its lenders, a Bloomberg report on Wednesday revealed allegations that the edtech firm concealed $533 million within a relatively unknown hedge fund, one that had previously claimed to operate out of an IHOP pancake restaurant in Miami.

According to court documents cited in the Bloomberg report, Byju's transferred over half a billion dollars to the Camshaft Capital Fund in 2022. Interestingly, this investment fund was established by William C. Morton at the age of 23, as claimed by several lenders involved in a lawsuit against BYJU'S. The lenders argue that Morton lacked formal training in investing, raising questions about the legitimacy of the fund.

Additionally, the court filing revealed that luxury cars, including a 2023 Ferrari Roma, a 2020 Lamborghini Huracán EVO, and a 2014 Rolls-Royce Wraith, were registered in Morton's name following the fund transfer.

The report citing court documents also said that Byju's lenders have said that Byju's engaged in deliberate efforts to conceal borrowers' $533 million, allegedly with the intention of hindering and prolonging creditors' recovery attempts.

Byju's has been in negotiations with its Term Loan B (TLB) lenders for several months, seeking a mutually agreeable solution to the repayment crisis. Earlier this week, Byju's put forth a repayment proposal to its lenders, offering to repay the entire $1.2 billion term loan in under six months, as reported by Bloomberg. 

“For record, the Byju’s entities are not parties to the proceedings mentioned in the recent media reports, and have not been served with copies of the complaint or motion. This is the first that we are hearing of these proceedings. The court filing appears to have been made prior to the latest loan repayment proposal. The parties continue to engage in negotiations to settle the dispute and we remain committed to an amicable outcome," Byju’s said.

The case dates back to November 2021 when Byju's secured a $1.2 billion term loan from a group of US creditors. This loan arrangement began to pose challenges for the company in June of the current year when it failed to meet a $40 million interest payment obligation. Consequently, Byju's initiated a legal battle against its lenders in the New York Supreme Court, responding to their legal actions with accusations of predatory practices. The company has declared its decision to withhold any additional payments to the lenders, including interest, pending the resolution of the dispute by the court.