Beleaguered Chinese Coffee Retailer Luckin Announces Private Equity Investment Of Up To $400M

Luckin Coffee Inc. LKNCY shares, which are traded over the counter following the financial improprieties that forced a bankruptcy filing, saw some upward bounce Thursday before pulling back. 

What Happened: Luckin said it has entered into an investment agreement with Centurium Capital and Joy Capital, two Chinese private equity investment firms, that could potentially fetch the coffee retailer up to $400 million in financing. 

Centurium, which is serving as the lead investor, has agreed to invest about $240 million in senior convertible preferred shares of Luckin through a private placement.

Joy Capital will invest about $10 million in senior preferred shares.

Both Centurium and Joy Capital, under certain circumstances, may upsize the investment on a pro rata basis for an additional $150 million, Luckin said.

The closing of the transactions is contingent on a series of closing conditions, including a restructuring of $460 million of the company's debt.

Luckin said it plans to use the proceeds of the investment for the proposed offshore restructuring and fulfillment of its obligations under its recently announced settlement with the SEC.

The transactions will allow the company to focus on its balance sheet, continued execution of its business plan, growing of the core coffee business and achieving its long-term growth targets, according to Luckin. 

Related Link: Luckin's Independent Board Member Quits Barely 3 Months Into The Job

Luckin Names New Independent Auditor: Separately, Luckin said it has appointed Centurion ZD, an independent accounting firm registered with the Public Company Accounting Oversight Board, as its auditor effective Thursday. 

Luckin's previous auditor MarcumBP believes it has not gathered sufficient independent third-party data or conducted sufficient audit procedures to complete the audit in light of certain areas identified in the company's IT general controls during the year ended December 2019, according to the coffee company.

To address the historical control issues, Luckin said it has enacted remediation enhancements to its controls environment and will continue that process. 

Luckin said it intends to work expeditiously with CZD to file its annual reports for the periods ended December 2019 and December 2020 as soon as possible.

LKNCY Price Action: At last check, Luckin shares were down 6.7% at $8.91. 

Related Link: Beleaguered Chinese Coffee Retailer Luckin Files For Chapter 15 Bankruptcy: What You Need to Know