Goldman Sachs: Luckin Coffee shareholders default 76.35 m touts of ADS forced sale

According tomedia reports, Goldman Sachs reported today that after luckin coffee shareholder Haode Investment (borrower) defaulted on a $518 million margin loan arrangement, the syndicate of lenders had instructed Credit Suisse Singapore Branch, which is the guarantor trustee, to exercise lender rights, i.e. to enforce the collateral, with an enforcement procedure involving 76,350,094 shares of Luckin Coffee American Depositary Stock (ADS).

Goldman Sachs: Luckin Coffee shareholders default 76.35 m touts of ADS forced sale

A total of 515,355,752 shares of Luckin Coffee Class B common stock and 95,445,000 Class A common shares were pledged, including additional pledged shares of entities controlled by luckin coffee CEO Qian Zhiya’s family trust, the report said.

The borrower is controlled by lu Zhengyao’s family trust, chairman of luckin coffee board. The loan arrangement has full recourse to Mr Lu and his spouse. In exercising its rights under the loan arrangement, the Lender has commenced enforcement proceedings against collateral to meet the Borrower’s obligations under the loan arrangement, including the conversion of Luckin Coffee’s Class B common stock to ADS.

There is no lock-in period for Luckin Coffee’s Class A common stock or ADS. Assuming that all shares pledged by the loan arrangement are sold, Mr Lu’s voting rights interest in Luckin Coffee will not be reduced, but Mr Qian’s beneficial and voting rights interests will be substantially reduced.

Under federal securities laws, these securities are freely transferred and the sale of these securities does not require them to be registered under the Federal Securities Act. Through the agency, the Lender is expected to sell these securities in one or more open markets and/or private transactions, depending on market conditions.

At present, there is no guarantee how many shares will be sold, and no proxy has committed to buying them. Lenders’ various affiliates may be buyers of these stocks. Neither Luckin Coffee nor Lu Zhengyao will participate in or otherwise participate in the sale of the shares;