Hong Kong, US hedge funds root for Luckin Coffee to overcome accounting scandal with debt restructuring pact
- Luckin has seen substantial growth in revenue this year after sales surged 33 per cent to US$618 million in 2020
- Chinese coffee chain signs binding pact to fully repay bondholders over five years and offers to settle a slew of class-action lawsuits in the US
All that is happening as the coffee chain added 89 self-operated stores in the first half this year to 4,018, while its partnership stores grew by 367. The firm saw “substantial growth in net revenue”, aided by a jump in customers, its provisional liquidators said earlier this month. Last year, sales grew 33 per cent to US$618 million.
“Data and experience accumulated during the past few years’ business expansion, as well as its tech prowess, make Luckin Coffee a company worth rescuing,” said Ivan Platonov, a research manager at EqualOcean, a Beijing-based tech research firm. “That US$250 million is important but perhaps will not be the last deal of this type.”
Luckin Coffee imploded in April 2020, less than a year after its Nasdaq listing, following revelations it inflated sales and understated costs to boost its performance metrics. The scandal wiped out more than US$12 billion in stock value, and crashed its bonds to as low as 20 cents on the dollar, prompting a slew of lawsuits.