Luckin Coffee secures $250 from Centurium Capital and Joy Capital

Proceeds will be used to facilitate the restructuring of the embattled coffee chain.

China-based Luckin Coffee has clinched investment from an affiliate of Centurium Capital and Joy Capital worth a total of $250m through a private placement of its senior preferred shares, the beleaguered firm announced in a press release.

Based on their agreement, Centurium Capital will be investing $240m, whilst Joy Capital is investing $10m. Under certain circumstances, the two China-based investors may be able to upsize on a pro rata basis for an additional $150m.

To close the transaction, they must implement a restructuring of Luckin Coffee’s $460m 0.75% convertible senior notes due 2025 through a scheme of arrangement based on the terms of the recently announced restructuring support agreement.

Luckin Coffee plans to use the proceeds of the investment to facilitate its proposed offshore restructuring and fulfill its obligations under its recently announced settlement with the U.S. Securities and Exchange Commission.

“The transactions allow the Company to focus its balance sheet on the continued execution of its business plan, focused on growing the core coffee business and achieving its long-term growth targets,” the company said.

On 16 March, Luckin Coffee revealed that it entered into a restructuring support agreement (RSA) with holders of a majority of its existing notes, who collectively hold or control about 59% in aggregate principal amount.

The RSA contemplates that the holders of the existing notes shall receive, for each $1,000 principal amount and interest of the existing notes, cash worth $320, a $230 principal amount of 9% one-year senior secured notes, a $300 worth of 9% five-year senior secured notes, and a number of american depository shares (ADS) of Luckin Coffee valued at $60.

If the company is able to raise equity worth $50m or more before the effective date of the restructuring, then each holder will have the option to replace up to $100 of the new $230 notes with ADSs, the five-year notes or cash.