Luckin Sinks After Goldman Says Lenders Selling up to 76.35m Shares

Following the occurrence of a default by Haode Investment, a shareholder of Luckin Coffee (LK) under a $518M margin loan facility, a syndicate of lenders, as secured parties under the facility, has instructed Credit Suisse (CS) to exercise the lenders' rights with respect to the collateral securing the borrower's repayment obligations under the facility.

A total of 515,355,752 Class B ordinary shares and 95,445,000 Class A ordinary shares of Luckin Coffee have been pledged to secure the facility, including shares additionally pledged by an entity controlled by the family trust of Jenny Zhiya Qian, the company's CEO. The borrower is controlled by the family trust of Charles Zhengyao Lu, the Chairman of the company's board. The facility is full recourse to Lu and his spouse.

In connection with the exercise of their rights under the facility, the lenders have commenced the process of enforcement against the collateral in order to satisfy the borrower's obligations under the facility, Goldman Sachs said in a statement. This includes the conversion of Class B ordinary shares of the company into American Depositary Shares.

The enforcement action equals up to 76.35M American Depositary Shares of Luckin Coffee. The stock in early trading is down 21%, or $1.11, to $4.27.

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