Wed 09/13/2023 07:39 AM
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Lenders to Byju’s Alpha Inc.’s $1.2 billion term loan B, or TLB, have alleged before a circuit court in Florida that the company transferred in 2022 cash aggregating to $533 million - funds that they had understood to be in the borrower’s bank accounts and available for debt service - to “an unproven high-risk hedge fund”, Camshaft Capital Fund, as a possible first step in removing the money from the reach of the lenders, according to court documents reviewed by Reorg.

The plaintiff, Glas Trust Company, LLC or Glas acting as the administrative agent and collateral agent for the TLB lenders - has also alleged that Byju’s has gone to “great lengths” to conceal the whereabouts of the $533 million for the purpose of “hindering and delaying Glas and the lenders”.

Glas has sought the court's directions to trace and track down the $533 million and any limited partnership interest given in Camshaft Capital Fund to Byju’s in exchange for those funds.

In its petition, Glas stated that it has recently learned that the funds were moved by the company in mid-2022 to Camshaft Capital, founded in August 2020 by William Cameron Morton, aged 23 at the time, with no formal training in investing or money management, and no apparent qualification to manage a hedge fund. The petition also states that the fund at one point listed an IHOP restaurant in Miami as its principal place of business.

IHOP, or International House of Pancakes, is a chain of American fast food restaurants.

The petition further details that since November 2022, Morton had been on “an extravagant spending spree” and has registered in his name expensive cars - including a 2023 Ferrari Roma, a 2020 Lamborghini Huracán EVO and a 2014 Rolls-Royce Wraith, “presumably” financed by fees charged to Byju’s account.

The petition also alleges that Byju’s CEO Byju Raveendran has gone to great lengths to conceal the whereabouts of Byju’s Alpha’s $533 million “for the admitted purpose of hindering and delaying GLAS and the Lenders”. brazenly claimed that “the money is someplace the lenders will never find” in response to the exercise of remedies by the lenders to recover the money.

Further, the petition states that days after Raveendran’s claim, Byju’s counsel admitted in open court that the borrower moved the funds to remove them from the reach of the lenders “based on fear of lenders acting expeditiously”.

At present, cash in hand with Byju’s stands at less than $1 million as against the $1.2 billion debt it needs to repay to its TLB lenders, according to the petition.

The court has ordered the defendants - Camshaft Capital Fund LP, Camshaft Capital Advisors LLC and Camshaft Capital Management LLC - to respond to Glas’ first set of interrogatories and first request for production of documents within seven days from the date of service of the complaint and produce the documents requested by Glas within 14 days from the date of such service.

Byju’s denied the allegations, saying in a statement that “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 (Byju’s) 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.”

In a report on the court documents, Bloomberg said that Camshaft’s lawyers maintained that Glas Trust had not informed them of the lawsuit. Camshaft vigorously denied the statements made in the court filing Bloomberg reported, citing Camshaft lawyer David Massey in an emailed statement.

Bloomberg earlier this week reported that Byju’s has offered to repay its entire $1.2 billion TLB to its creditors in less than six months.
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