On the evening of 16th Beijing time, lucky coffee announced on its official website that it had reached an agreement with major debt holders to restructure its debt and strengthen its capital structure, and would fulfill its debt obligations in this agreement in the near future.

It is understood that holders of notes are expected to receive 91% - 96% of the face value of the existing notes. At the same time, lucky said that the company is actively using a variety of channels for financing, and is currently engaged in 30 days of internal discussions with trusted investors to raise at least $250 million through private placement.

On March 16, US Eastern time, lucky coffee powder single market shares closed at $8.72, up 49.32%.

Disclosure of repayment plan

Specifically, the existing repayment agreement is aimed at the majority holders of convertible senior notes, accounting for about 59% of the principal of the existing notes, among the $460 million debt due in 2025.

According to the announcement, lucky coffee's repayment plan includes the following two parts.

First, holders of existing notes should receive, on or after the restructuring effective date, for every $1000 principal plus accrued and unpaid interest:

Cash is $320, equivalent to 32% of the face value recovered (cash consideration). 9.00% one-year senior secured note (new note a) with a principal amount of $230, equivalent to 23% of the recovered face value; and a 9.00% five-year senior secured note (new note b) with a principal amount of $300, representing 30% of the recovered face value.

Add in a number of $60 worth of lucky coffee American Depository shares, equivalent to 6% of face value. Together, the four items account for 91% of the face value of the outstanding bonds.

In the second part, the announcement disclosed that if lucky could acquire equity of US $50 million or more before the effective date of restructuring, each existing noteholder would have the option to replace the principal amount of new note a of $100 per $230 of the principal amount of new note a in the form of American Depository shares.

If there are no ADSS, you can choose new paper B or cash to make up for the additional 5%. "The second part of the plan involves debt to equity swap, which also shows the current note holders' confidence in the future operation of lucky coffee." A senior US stock investor told reporters.

According to the requirements of the agreement, lucky will soon start China's regulatory approval process, transfer funds overseas through capital cuts, and disclose its unaudited cash balance of about $775 million as of February 28.

The capital reduction process needs to be approved by China's regulatory authorities, and lucky coffee also promised that this part of the capital will not affect the normal business of the company, including payment and compensation to suppliers and employees.

At the same time, because it is uncertain whether it can obtain the approval of Chinese regulatory authorities, lucky is also looking for solutions from external investment. Currently, lucky is in a 30 day discussion with a trusted investor to obtain at least $250 million in equity financing. However, lucky does not guarantee the terms or completion of this transaction.

Out of the mire

In mid December last year, the provisional liquidator of lucky coffee submitted the first progress report on debt restructuring to the Grand Court of the Cayman Islands.

According to the report, as of November 30, 2020, the company held unlimited cash, cash equivalent and short-term investment balance of $742.7 million. Combined with the disclosure of cash balance of about $775 million in the restructuring agreement, the cash flow of lucky coffee has increased by more than $30 million in the past three months.

Meanwhile, in the first three quarters of 2020, the company's single quarter revenue was 565 million yuan, 980 million yuan and 1145 million yuan, with a year-on-year increase of 18.1%, 49.9% and 35.8%, with a total revenue of 2.67 billion yuan. In the first 11 months, 1021 self operated stores were closed. In August, it realized the overall profit at the store level for the first time. Judging from the cash flow situation, its profit may have remained at the beginning of the year.

On February 5 this year, lucky coffee issued a statement in response to its application for bankruptcy in the United States. According to the response, as an important step in the company's reorganization, it is also a common practice under the Cayman procedure. The provisional liquidator filed a lawsuit with the U.S. court to seek the approval of the U.S. court for the company's current provisional liquidation procedure in Cayman.

The procedure will suspend the proceedings against the company in the United States, creating conditions for the completion of the reorganization of the company and orderly completion of the reorganization. Three days later, lucky coffee announced a settlement with the securities and Exchange Commission (SEC), which was approved by the court on February 4.

On February 17, 40 days after being jointly reported by several vice presidents of lucky coffee, general managers of all branches and senior executives of core business, the internal investigation results fully recognized Guo Jinyi, chairman and CEO of the company. The latter then published an internal letter, revealing that there are nearly 4800 stores in Ruixing, nearly 100 million registered users, and more than 300 million drinks are sold.

In addition, in January 2021, Ruixing opened more than 120 new stores. During the Spring Festival holiday, more than 1900 stores of Ruixing coffee were opened in China. The number of beverage cups currently made was nearly five times that of the same period last year, and the revenue was nearly seven times that of the same period last year.

In a public statement on March 16, lucky promised that all its coffee shops would continue to operate, and the debt restructuring was expected to strengthen the company's financial stability and enhance its ability to continuously serve customers.

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