The Luckin Resurgence: Why Beleaguered Coffee Chain's Shares Spiked 49% Today

The shares of beleaguered coffee-chain company Luckin Coffee Inc. LKNCY, traded over the counter, saw a sharp spike on Tuesday, closing 49.3% higher at $8.72.

What Happened: The surge came as Luckin announced entering into a restructuring support agreement with key lenders holding the 0.75% convertible senior notes due 2025 — representing about 60% of its convertible debt amounting to $460 million.

Luckin said the restructuring of the debt is expected to allow it “to comprehensively address its capital structure and better position it for long-term success.”

As part of the restructuring agreement, the bondholders can cash in $320 for every $1,000 in principal amount and accrued and unpaid interest.

They could also get $230 in one-year senior secured notes paying 9%  interest, or $300 in five-year senior secured notes paying 9%, and $60 in American Depositary Shares of Luckin.

Jinyi Guo, the CEO of the coffee-chain company, dubbed the agreement with noteholders an “important milestone for Luckin Coffee."

“The Board of Directors and management team believe that the Restructuring is in the best interests of the Company and its stakeholders. We will continue to take action to strengthen our capital structure while delivering outstanding products and services for our customers," Guo said.

Why It Matters: Luckin was once pitted as one of Starbucks Corporation’s SBUX biggest competitors in China.

That was until April last year when the company’s chief operating officer admitted to fabricating transactions and inflating sale numbers.

Luckin chairman and board members were engaged in a tussle to oust each other amid the company's stock getting delisted from the Nasdaq.

The Xiamen-based company filed for a Chapter 15 bankruptcy filing in February.