Luckin Lenders Wins Court Order, Will Wind Down Lu Zhengyao’s Two Assets

On June 21, Cayman Island court filing showed that banks led by Credit Suisse Group AG won an order to wind down two entities controlled by the family of Luckin Coffee Inc. Chairman Lu Zhengyao, in order to recover $324.1 million of outstanding debt.

The lender had previously provided $533 million in loan financing, backed by Luckin shares. Banks including Credit Suisse Group and Morgan Stanley still face a $300 million shortfall in margin loans after selling shares pledged by Lu at knockdown prices, Bloomberg said.

Judge Raj Parker will grant orders to liquidate two holdings — Primus Investments Fund and Mayer Investments Fund — which hold shares in Luckin and are ultimately controlled by the Lu family, according to the judgment delivered on June 16 in the Court of the Cayman Islands.

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Lu owns a stake in Luckin mainly through family trust Haode Investment Inc. (Haode), according to the company’s prospectus. Haode holds about 297 million Luckin shares, while Primus, which is wholly owned by Haode, holds 187.5 million Luckin Class B common shares.

Primus had pledged 56.25 million luckin shares to underwriters to secure loans. The lenders have also filed a winding-up application in the British Virgin Islands for Lu’s family trust, Haode. It was not immediately clear whether there would be a verdict.

In addition, according to Luckin’s prospectus, Mayer holds about 197 million Luckin Class B common shares, while Mayer is held by Mayer Management GP, Limited, which is controlled by Lu’s sister, Sunying Wong.

According to Wind, as of January 21, Lu Zhengyao held about 484 million shares of Luckin coffee, accounting for 23.94%, while Lu Zhengyao’s sister Sunying Wong held about 197 million shares, accounting for 9.72%. Together, they held about 682 million shares of Luckin coffee, accounting for 33.66%.

The imminent liquidation of Mr. Lu’s two entities and the filing of a family trust, Haode, could mean that his position as Luckin’s largest shareholder could be shaken.

On one hand, Lu Zhengyao’s position as Luckin coffee’s largest shareholder could be shaken. On the other hand, Lu Zhengyao’s administrative position in Luckin coffee is also facing a crisis.

On June 19, Luckin issued a statement saying it would hold an extraordinary general meeting on July 5 to discuss the restructuring of the company’s board, including the removal of chairman Lu Zhengyao, directors Li Hui and Liu Erhai, and the independent director Sean Shao.