Friday, 2024 June 14

Luckin Coffee to restructure debt, raise USD 250 million in equity financing

Xiamen-headquartered beverage chain Luckin Coffee disclosed on Tuesday that it has entered into a debt restructuring agreement with creditors holding about 59% of the USD 460 million convertible senior notes due 2025, who can claim back between 91% and 96% of their money.

This move is designed to allow the company to comprehensively address its capital structure and to better position it for long-term success, said Luckin Coffee.

The firm further said it is engaged in discussions with a credible investor, with a view to raise at least USD 250 million of equity funding through a private placement, which is an alternative funding solution.

Luckin was once a darling for investors but fell from grace after a RMB 2.2 billion fraud scandal that was surfacing in April last year. In December, it settled with the SEC for a USD 180 million penalty. China’s State Administration for Market Regulation also pressed charges for irregularities.

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CEO and chairman Guo Jinli meanwhile just survived an internal probe following bribery accusations which he considered to stem from former chairman Lu Zhengyao and ex-CEO Qian Zhiya, according to a Caixin report in February.

Despite the scandal and ongoing battle on the board, Luckin managed to keep all its stores in China open and stayed in business, paying suppliers and employees, the company said Tuesday. It is still holding a USD 775 million cash balance, excluding restricted cash and illiquid investments, as of February 28.

The chain even opened 120 new stores in January, on top of the 4,800 outlets it had at the end of 2020, according to the Caixin report.

“Today, we have a new leadership team and a viable plan to return Luckin Coffee to growth and value creation,” said Guo in the statement.

Jingli Song
Jingli Song
I believe Chinese innovation at various level needs to be known by the world.

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