China’s Luckin Coffee files for Chapter 15 bankruptcy in US
- Company continues to meet trade obligations in the ordinary course of business, it says
- Chain’s collapse has led to renewed scrutiny of Chinese companies that sell shares on US exchanges
Embattled Chinese coffee chain Luckin Coffee filed for Chapter 15 bankruptcy in New York, less than a year after the company said that more than a quarter’s worth of business may have been faked.
The move will protect the company from lawsuits by US creditors while it reorganises in China, where it runs several thousand outlets. All its coffee shops will remain open for business and the Chapter 15 petition will not materially impact the company’s day-to-day operations, according to a statement issued on Friday.
“The company continues to meet its trade obligations in the ordinary course of business, including paying suppliers, vendors and employees,” the statement said.
The bankruptcy filing caps a saga in which the coffee chain, once thought of as a challenger to Starbucks’ dominance in China, fired its chairman and chief executive, paid hundreds of millions out in fines to regulators in both China and the United States, and saw its stock plunge 90 per cent before being delisted by Nasdaq.
The US Securities and Exchange Commission (SEC) fined the company US$180 million in December after finding that it intentionally fabricated more than US$300 million in sales from April 2019 through January 2020. The company has never officially admitted or denied the SEC’s allegations.