Luckin Coffee, which saw two of its top executives fired last year for mismanagement, said it has filed for Chapter 15 bankruptcy protection in the U.S. so it can move forward with its restructuring efforts.
The Beijing-based company, which is publicly traded in the U.S., filed the bankruptcy petition with the U.S. District Court for the Southern District of New York. The petition seeks in part to have the U.S. court recognize its provisional liquidation pending before the Grand Court of the Cayman Islands.
“The company is negotiating with its stakeholders regarding the restructuring of the company’s financial obligations, to strengthen the company’s balance sheet and enable it to emerge from the Cayman proceeding as a going concern, for the benefit of all stakeholders,” Luckin Coffee said in a statement on Friday (Feb. 5).
Often referred to as the Starbucks of China, Luckin is China’s fastest-growing coffee chain.
Luckin Coffee said the U.S. Chapter 15 proceedings are a key part of its proposed restructuring. It added that the legal relief being sought from the U.S. court would help protect stakeholder interests during the restructuring process by allowing for centralized administration of the company’s assets and coordination between the U.S. and Cayman courts.
The company said its shops in China remain open and that the Chapter 15 filing should not affect daily operations. It added that it is still paying its employees, vendors and suppliers.
In May, Luckin Coffee terminated its CEO Jenny Zhiya Qian and COO Jian Liu following an internal probe into allegations that the company had fabricated transactions that resulted in the inflation of its revenue numbers by more than $300 million. The probe was launched by the company’s board of directors. The scandal resulted in China’s top regulator, the State Administration for Market Regulation, fining two Luckin business entities, along with 43 other companies, about $9 million for inflating sales and expenses. The regulator said that Luckin had also misled customers by using fake data in its promotions.