On april 11, 2022, Luckin espresso introduced that the organization has correctly completed the debt restructuring. With the assist of lenders, the business enterprise formally ended the financial disaster protection process as a debtor.
Following the financial fraud case of Luckin Coffee, there has been a heated discussion on the Internet about Luckin Coffee’s “resurrection”. Only 18 months after its establishment, Luckin Coffee went public in the United States, and then blew itself up as a financial fraud of 2.2 billion yuan. After being collectively sued by American investors and the company’s top executives were shaken, it made a comeback with $250 million in new financing.
01) Luckin Coffee Faces Bankruptcy Crisis
On May 12, 2020, Luckin Coffee announced the adjustment of the board of directors and senior management, and the suspension of the CEO and COO.
On May 15, 2020, Nasdaq issued a delisting notice to Luckin Coffee. On the 21st, Luckin resumed trading on the Nasdaq. It fell by more than 50% before the market. As of the close, Luckin Coffee fell by 35.76%, the stock price was reported at 2.82 US dollars, and the total market value was 714 million US dollars. After Nasdaq issued a mandatory delisting request, Luckin plans to request a hearing on this decision, and will continue to list on Nasdaq until the hearing results are released.
On June 26, 2020, Luckin Coffee (Nasdaq: LK) announced that the company has decided to withdraw its previous request for a hearing, and the company’s stock will be suspended at the opening of the market on June 29, 2020.
On July 5, 2020, Luckin Coffee held an extraordinary general meeting of shareholders on the afternoon of the same day. The meeting voted to approve the removal of directors Lu Zhengyao, Li Hui, Liu Erhai and Sean Shao.
On July 31, 2020, an investigation by the China Securities Regulatory Commission, the Ministry of Finance, the State Administration for Market Regulation and other departments revealed that Luckin Coffee’s domestic operating entities, related managers, and related third-party companies made large-scale fictitious transactions, inflated income, costs, and expenses. Propaganda and other acts violate the relevant provisions of my country’s Accounting Law and Anti-Unfair Competition Law. Luckin Coffee’s domestic related NEEQ-listed companies Shenzhou UCAR Co., Ltd. and Beijing Hydrodynamic Yiwei Technology Co., Ltd. violated the relevant provisions of my country’s Securities Law. The Ministry of Finance, the State Administration for Market Regulation, and the China Securities Regulatory Commission will impose administrative penalties on Luckin Coffee’s domestic operating entities and relevant responsible persons, as well as a number of third-party companies that assist in fraudulent and false propaganda, two NEEQ affiliated companies and relevant responsible persons. The CSRC has served the parties involved in the case with an advance notice of administrative punishment. If the relevant responsible subjects are suspected of committing a crime, they will be transferred to the public security and judicial organs for further accountability.
On September 18, 2020, the State Administration of Market Supervision and the Shanghai and Beijing market supervision departments, the Luckin Coffee (China) Co., Ltd., Luckin Coffee (Beijing) Co., Ltd. 45 companies involved in the case, including Science and Technology Development Co., Ltd. and Zhengzhe International Trade (Xiamen) Co., Ltd., made administrative punishment decisions, with a total penalty of 61 million yuan.
02) Luckin Officially Completed The Debt Restructuring
Recently, Luckin Coffee announced that in accordance with the provisions of Chapter 15 of Title 11 of the United States Code, the company has successfully completed the debt restructuring. With the support of creditors, the company officially ended the bankruptcy protection procedure as a debtor. Guo Jinyi, chairman and CEO of the company, said that this marks a new beginning for the company, and the company is well positioned to continue growing and create long-term value for stakeholders.
Since Luckin entered the capital market, it has been hot. In May 2019, the company was listed on Nasdaq in the United States, setting a new record for the fastest IPO in the world; in April 2020, the company was exposed to financial fraud, and subsequently received two Nasdaq delisting notices; in June 2020, the company Announced the delisting filing, but faced huge compensation; in July 2020, Guo Jinyi was ordered to take over as chairman and CEO of the company.
In January this year, a buyer group led by Dazheng Capital acquired all the shares held by former members of Luckin’s management including Lu Zhengyao. After the completion of this transaction, Dazheng Capital became the controlling shareholder of Luckin Coffee, holding more than 50% of its voting rights. After the transaction is completed, the former management members no longer have any interest in the sale of shares, and the equity of the original fake management has also been liquidated.
In February, the company announced that it had complied with a $180 million civil penalty resulting from a previous settlement with the SEC.
Dingxin liquidation comment: The court’s decision marks the official end of Luckin’s bankruptcy proceedings in the United States, and the company will no longer be subject to bankruptcy or bankruptcy proceedings in any jurisdiction. Since then, the company has fully solved the problems left over from history and returned to the normal company state. “This is a new beginning for Luckin.”
03) What Is Debt Restructuring? What Are The Ways And What Legal Effects Will Be Produced?
What is debt restructuring
As an important economic activity of enterprises, debt restructuring plays an important role in resolving debt risks, adjusting property rights structure, optimizing capital structure, reintegrating economic resources, and promoting the continuous development of enterprises on the track of legalization.
Debt restructuring refers to a transaction in which the time, amount or method of repayment of debts is re-agreed upon agreement between the creditor and the debtor or a court ruling without changing the counterparty of the transaction. That is to say, as long as the original debt repayment conditions are modified, that is, the debt repayment conditions determined during the debt restructuring are different from the original agreement, they are regarded as debt restructuring.
To understand in simple words: Company A owes three creditors 10 million yuan respectively, while the company’s funds are only 20 million yuan. Normally, the company is in a state of insolvency and generally needs to go through bankruptcy liquidation procedures. However, after the bankruptcy of the company, it is not beneficial to the three creditors (the debt cannot be fully recovered), so it was agreed that each creditor should ask for a minimum of 5 million yuan, so that the company will have a chance to survive and continue to create value to repay the debt; Or they can turn the creditor’s rights in their hands into the capital of the company (debt-to-equity swap), become the company’s shareholders, and maintain the company’s operating dividends.
What are the means of debt restructuring?1. Pay off debts with assets
A debt restructuring method in which the debtor transfers its assets to the creditor in order to pay off the debt. The assets usually used by debtors to repay debts mainly include: cash, inventories, financial assets, fixed assets, intangible assets, etc. Paying off debts in cash usually refers to paying off debts with cash that is lower than the book value of the debts.
2. Debt into capital
A debt restructuring method in which the debtor converts debt into capital and the creditor converts the creditor’s rights into equity. However, if the debtor converts the payable convertible corporate bonds into capital according to the conversion agreement, it is debt capital under normal circumstances and cannot be treated as debt restructuring.
3. Modify other debt conditions
Reduce debt principal, lower interest rates, waive unpaid interest, etc.
4. Combination of the above three methods
A form of debt restructuring that uses the above three methods to jointly pay off debts.
(1) Part of the debt is paid off with assets, and the other part is converted into capital;
(2) Part of the debt is paid off with assets, and the other part is modified with other debt conditions;
(3) Part of the debt is converted into capital, and the other part is modified to other debt conditions;
(4) Part of the debt is paid off with assets, part is converted into capital, and the other part is modified with other debt conditions.
What are the legal effects of debt restructuring?04) Luckin’s New Journey – Sinking The Market
Our evaluation of brand value is usually based on a very critical judgment, that is, whether it can continue to expand.
In 2021, Luckin Coffee will enter 33 new cities, basically achieving full coverage from first-tier cities to third-tier cities, and even fourth-tier cities have a coverage rate of up to 80%. It can be said that Luckin Coffee’s layout in cities is approaching saturation.
If it is not enough to develop new cities, it is necessary to deepen the existing market. So, how to estimate the market size of Luckin in different cities?
We calculated the correlation between the number of Luckin Coffee’s stores and more than a dozen social and economic indicators, and found that when Luckin Coffee planned the size of its stores in a city, it made more reference to the size of the city’s coffee categories.
The urban distribution of Luckin Coffee is highly consistent with the urban distribution of coffee categories, reaching 0.94. What is this concept? As long as I know the number of coffee categories in any city, I can roughly guess how many stores Luckin has opened here, and the overall error will not exceed 6%.
Could this be a temporary coincidence? Taking the time factor into account, we found that the fitting degree of this law is constantly improving, so we believe that this law has a very high trend predictability.
The main contribution to the growth rate of Luckin Coffee’s stores comes from the third-tier and below markets, with an average growth rate of over 150%, which will increase the proportion of Luckin Coffee’s stores in low-tier cities and decrease the proportion of stores in high-tier cities. , making Luckin Coffee’s store distribution closer and closer to category distribution.
In the foreseeable future, Luckin Coffee will further develop the sinking market dominated by third- and fourth-tier cities. To allow cities that lack enough coffee groups to accept coffee, Luckin has also put a lot of effort into its products, trying to make itself more like “coffee-flavored milk tea” rather than pure coffee.
Not only the “Coconut Cloud Latte” co-branded with Coconut Group recently, but also the previous popular “Raw Coconut Latte”, all of which cater to a wider audience in terms of products and win greater survival in the current market. space to create favorable conditions for further subsidence.
05) What Enlightenment Does Luckin, Reborn From Ashes, Give Us?
Luckin is still that Luckin, but Luckin is not that Luckin anymore.
Since the exposure of financial fraud in 2020, Luckin has experienced a series of uncertain events such as delisting from Nasdaq, high-level infighting, founder exit, and facing huge claims. Fortunately, these scandals did not defeat Luckin.
Today, the controversial and questioned company has come back to life in an incredible way. Luckin has finally fully resolved the problems left over from history and returned to normal company status.
In short, Luckin is alive again.
How did Luckin phoenix nirvana, reborn from ashes? What lessons does this experience have for entrepreneurs?
1) Product strength: On June 30, 2021, Luckin announced that the monthly sales of the raw coconut series exceeded 10 million cups, setting a new sales record for Luckin’s new products. Because the product is good enough, it has won cash flow for Luckin.
2) Capital strength: Luckin has regained the trust of investors. In April 2021, Luckin received an additional capital injection of US$250 million from the old shareholders Dazheng Capital and Joy Capital.
3) Channel power: In July 2021, the number of Luckin franchise stores has reached 1,293, and the number of self-operated stores has also recovered to 4,030. Luckin is still the closest and most convenient boutique coffee store choice to consumers.