Luckin Coffee's lenders win court order to wind down chairman's offshore assets

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Lenders led by Credit Suisse have won a court order seeking to wind down entities controlled by the family of Luckin Coffee Chairman Lu Zhengyao as they try to recover US$324.1 million of outstanding debt, according to a Cayman Island court filing.

Judge Raj Parker will grant orders to liquidate two holdings " Primus Investments Fund and Mayer Investments Fund " which hold shares in Luckin and are ultimately controlled by the Lu family, according to the judgment delivered on June 16 in the Court of the Cayman Islands.

The court rejected a request by Primus and Mayer to dismiss the petition to allow them to repay the debts by refinancing or selling assets, saying there is no credible evidence that the debt will be paid within a reasonable time.

"There is no evidence to suggest that the debtors are in a position to meet their contractual commitments if the lenders were willing to forebear exercising their contractual rights," the judge said in the filing.

Key executives including Jenny Qian Zhiya and Charles Zhengyao Lu celebrate the coffee chain's Nasdaq listing day in May 2019. Photo: Reuters alt=Key executives including Jenny Qian Zhiya and Charles Zhengyao Lu celebrate the coffee chain's Nasdaq listing day in May 2019. Photo: Reuters

Luckin Coffee, often viewed as China's answer to Starbucks, last month fired its chief executive Jenny Qian Zhiya and chief operating officer Liu Jian after an internal investigation into fabricated transactions that roiled investors and undermined the trust in Chinese financial reporting.

Luckin and Credit Suisse did not immediately return calls seeking comment on the court decision.

The lenders in September provided a US$533 million loan facility secured by Luckin Coffee shares. They were also seeking a court order in the British Virgin Islands to appoint liquidators for Haode Investment, which is controlled by Lu's family trust.

Banks including Credit Suisse and Morgan Stanley raised about US$210 million over the past two months selling Luckin shares that Lu had pledged as collateral, people familiar with the matter said. They still face a US$300 million shortfall on margin loans to the founder.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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