China's Luckin Coffee seeks US Chapter 15 bankruptcy protection

[NEW YORK] China's Luckin Coffee, whose explosive growth was derailed last year by accounting fraud, said on Friday it is seeking protection under Chapter 15 of the US Bankruptcy Code.

The coffee chain said the Chapter 15 petition, which would facilitate the restructuring of its debts, is not expected to materially impact its day-to-day operations, and that its stores remain open.

Chapter 15 bankruptcy allows a foreign debtor to shield assets in the United States.

Xiamen-based Luckin had positioned itself as an ambitious home-grown challenger to US coffee giant Starbucks, but said last April that as much as US$340 million in 2019 sales had been fabricated.

Luckin delisted from Nasdaq at the end of June last year after admitting to accounting fraud.

In December, it agreed to pay the US Securities and Commission a US$180 million penalty to settle accounting fraud charges for "intentionally and materially" overstating its 2019 revenue and understating a net loss.

The company said that it continues to meet its ongoing business obligations and is paying suppliers and staff.

REUTERS