(Bloomberg) – The troubled Chinese coffee chain Luckin Coffee Inc. filed for Chapter 15 bankruptcy in New York less than a year after the company said more than a quarter of the deals may have been faked.
The move was designed to protect the company from lawsuits from US creditors, including bondholders owed $ 460 million and shareholders. Luckin’s coffee shops in China will remain open and operations will not be affected by the order, according to a statement released on Friday.
“The company continues to fulfill its commercial obligations in the normal course of business, including paying suppliers, vendors and employees,” said the statement.
In US court documents, Luckin asked a Manhattan federal judge to allow him to restructure his finances through an open court case in the Cayman Islands, where the company is incorporated. This process is already underway and aims to negotiate an agreement with shareholders and bondholders, according to court documents.
The bankruptcy filing ends a saga in which the coffee chain, previously considered a challenger to the dominance of Starbucks Corp. in China, he fired his president and chief executive officer, paid hundreds of millions in fines to Chinese and American regulators. and saw its shares plummet 90% before they were withdrawn from the stock market by Nasdaq.
The U.S. Securities and Exchange Commission fined the company $ 180 million in December after discovering it intentionally manufactured more than $ 300 million in sales from April 2019 to January 2020. The company never officially admitted or denied the SEC’s claims. .
Luckin’s alleged misconduct, which involved misrepresenting its operating income, expenses and losses, was made to give investors the false impression that the company was experiencing miraculous growth, the SEC said.
Last year, the company hired law firm Kirkland & Ellis and restructuring consultant FTI Consulting Inc. to investigate the allegations. Based on its findings, the company fired its chief executive officer and chief operating officer, according to the United States court case.
The network’s collapse has led to further scrutiny by Chinese companies selling shares on US stock exchanges without adhering to rules that require their audits to be inspected by American regulators. The consequences also generated new concerns for global investors about China’s corporate governance, while also helping the US Congress pass legislation late last year that could lead to Chinese companies being expelled from American markets.
Founded in 2017, Luckin operated 3,898 points of sale on November 30 with 894 “partner” stores. The network attracted customers by offering massive discounts and sought to reach 10,000 locations by the end of 2021.
Its coffee – cheaper than Starbucks and sold in travel kiosks close to urban professionals – remains popular in China. Sales grew 35.8% in the quarter ended September 30 compared to the previous year, according to a document posted on its website.
“This process does not mean that Luckin will close,” said Jason Yu, managing director of Kantar Worldpanel Greater China. “He can use the deposit to drop debt, close some unprofitable operations and focus on his core business.”
The case is Luckin Coffee Inc., 21-10228, US Bankruptcy Court, Southern District of New York, Manhattan. To view the Bloomberg Act summary, click here.
(Updates with the holder’s debt in the second paragraph and internal investigation in the eighth paragraph.)
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