MILAN – Lenders led by Credit Suisse Group AG have won court orders to liquidate tens of millions of dollars in Luckin Coffee Inc. owned by the family of the chairman Lu Zhengyao. The Grand Court of the Cayman Islands ruled in favour of the lenders, which are owed $324 million after Lu defaulted on a margin loan facility.
This development could weaken Lu’s control over the company as a crucial shareholder vote looms.
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.
The court rejected a request by Primus and Mayer to drop the petition to allow them to repay the debts by refinancing or selling assets, saying there is no credible evidence that the debt will be paid within a reasonable time.
Lu and his family have been the largest shareholders in Luckin and own class B shares that carry extra voting rights. Lu controlled about 36.8% of Luckin’s voting rights as of March this year, according to the company’s regulatory filings. The liquidation would reduce the number of class B shares he holds by about a quarter. Such shares have 10 times the voting rights of Luckin’s ordinary shares.
The lenders— which include Morgan Stanley, Goldman Sachs Group and Barclays Bank – in September provided a US$533 million loan facility secured by Luckin Coffee shares.
They were have also filed a winding-up petition in the British Virgin Islands against Haode Investment Inc., another entity held by the Lu Family Trust.
