BYJU’S Maintains Status Quo as US Court Denies Creditors’ Relief for $533 Million Gap

Merely a day following a US bankruptcy court’s issuance of orders for the apprehension of a hedge fund manager, accused of aiding BYJU’S in concealing $533 Mn (44,176 crores approximately), the edtech giant has swiftly retaliated. BYJU’S has alleged that its term loan B (TLB) lenders are seizing the opportunity to craft false stories in the media to blemish its reputation.

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In a statement issued on Friday (March 15), BYJU’S contended that on Thursday (March 14), the judge dismissed the lenders’ plea to have the $533 Mn surrendered to the court. Instead, the bankruptcy court ordered a temporary halt to maintain the current situation and block the transfer of the mentioned funds.

Our stance remains unchanged: the funds in question have always been securely held in one of our subsidiaries, and the recent order confirms they will rightfully stay there. It’s worth noting that the court rejected the main request for a mandatory injunction to deposit the money into court. As stated by a spokesperson for BYJU’S, this decision essentially maintains the existing situation.

Furthermore, BYJU’S stated that during legal proceedings, the legal counsel for BYJU’s Alpha, a subsidiary under the control of BYJU’S lenders, acknowledged that the creditors themselves had personally confirmed the placement of $500 million with one of our company’s subsidiaries in early 2023.

The spokesperson mentioned that the lenders, along with some “big investors” of the edtech company, were teaming up to make hefty profits and take advantage of the situation. However, they didn’t give much detail about what exactly that situation entailed, just hinting at the ongoing series of problems the company has been facing.

The edtech company hit back, accusing the lenders of making unfounded claims and labeling them as “opportunistic.” They added that these creditors were only interested in squeezing out harsh financial deals.

“We want to make it crystal clear that we’re not backing down in this battle to defend ourselves, and most importantly, to protect the interests of all those who rely on us, including the millions of students we’re proud to serve,” the spokesperson emphasized.

“This whole situation boils down to a group of foreign lenders trying to take advantage of an Indian startup by throwing around baseless accusations, all for the sake of getting what they want financially,” they concluded.

Just a day ago, word got out that the insolvency court had issued a warrant for the arrest of William Cameron Morton, the manager over at Camshaft hedge fund. Why? Well, it seems Mr. Morton decided to play hooky, claiming he was laid up in a foreign hospital and couldn’t make it to court.

Adding fuel to the fire, the court laid down a hefty fine of $10,000 per day on the hedge fund until they decide to play ball and cooperate with the investigation concerning the missing funds.

This is just the latest episode in the ongoing drama surrounding BYJU’S. The education tech giant is already embroiled in a very public spat with investors over a $200 million rights issue, which ended up being executed at a valuation slash of 99%. Things got so heated that the investors called for an emergency general meeting (EGM) to kick out the CEO and founder Byju Raveendran and reshuffle the company’s board.

On top of all that, BYJU’S is also grappling with a cash crunch, forcing them to push back on salary payments and vendor dues. Tough times ahead for sure.

In response to accusations of aiding in concealing funds, BYJU’S contested TLB lenders’ attempts to tarnish its reputation with false claims. The bankruptcy court’s decision to temporarily block funds transfer affirmed BYJU’S stance on securely holding the money in a subsidiary. Amidst legal proceedings, BYJU’S hit back at lenders and investors, alleging opportunism and unfounded accusations. Meanwhile, an arrest warrant for a hedge fund manager added to the ongoing drama. Compounded by a public spat with investors, a drastic rights issue devaluation, and financial strains forcing payment delays, BYJU’S faces turbulent times ahead.