China Luckin Coffee filed for bankruptcy in the US – aims at reorganization by debt restructuring

Recently CNN.co.jp reported the following:

 Business

中国ラッキンコーヒー、米で破産申請　債務整理で再建目指す

2021.02.07 Sun posted at 14:42 JST

ニューヨーク（ＣＮＮ Ｂｕｓｉｎｅｓｓ） 中国のコーヒーチェーン「ラッキンコーヒー」は７日までに、米国で連邦破産法１５条の適用を申請したと発表した。

同社は声明で、申請により財務の改善や債務の整理などを図ると説明。日常の事業は続けるとし、約３６００店のカフェの営業は維持するともした。

連邦破産法１５条は、本拠がある国で経営再建を進める外国企業が米国内の資産を保護する目的で申請する。

同チェーンでは昨年４月、前最高執行責任者（ＣＯＯ）らが絡む売上高などの不正会計が発覚。翌月には前ＣＯＯと最高経営責任者（ＣＥＯ）が解任されてもいた。

数カ月後には米ナスダック市場からの上場廃止に追い込まれてもいた。米証券取引委員会（ＳＥＣ）は同年１２月、同社が直面する詐欺罪の和解案を示し、１億８０００万ドルの罰金も科していた。

ラッキンコーヒーは売上高の力強い成長を背景に２０１９年、ナスダックに上場。一時は米コーヒーチェーン大手「スターバックス」の競合相手になり得るとも目されていた。

Translation

New York (CNN Business) Chinese coffee chain "Luckin Coffee" announced on the 7th that it had applied for the application of Article 15 of the Federal Bankruptcy Law in the United States.

The company said in a statement that by applying, it would improve its finances and restructure its debt. It said that it would continue its daily business and would maintain the operation of about 3,600 cafes.

Article 15 of the Federal Bankruptcy Law was applicable for the purpose of protecting assets in the United States held by foreign companies that were doing restructuring in their country of origin.

In April of last year in this chain, fraudulent accounting practice such as sales involving the former Chief Operating Officer (COO) was discovered. In the following month, the former COO and Chief Executive Officer (CEO) were also dismissed.

 A few months later, it was forced to be delisted from the US Nasdaq market. In December of the same year, the US Securities and Exchange Commission (SEC) presented the company a settlement for the fraudulence charge it was facing, and the company was fined of $180 million.

Luckin Coffee was listed on the Nasdaq in 2019 against the backdrop of strong sales growth. At one point, it was also expected to be a competitor to the major US coffee chain Starbucks.

              So, there is a lesson to learn from the Luckin Coffee (瑞幸咖啡) incident. A company can add a lot of locations and suddenly realizes that the demand for them does not exist. Many super-fast-growing companies usually collapse quickly in this way. The Chinese market is vastly different from the U.S.— it is far more like “Wild West”.

Note:

In April 2020 it was found out that Luckin Coffee (瑞幸咖啡) in China had inflated its 2019 sales revenue by up to US$310 million. Trading was suspended and the company was delisted from NASDAQ on 29 June 2020.The company filed for bankruptcy in the US in February 2021.