(Bloomberg) — Banks including Credit Suisse Group AG and Morgan Stanley face a $300 million shortfall on margin loans to the embattled founder of Luckin Coffee Inc., after they sold shares he had pledged as collateral for deeply depressed prices.The lenders, which also include Haitong International Securities Group and Goldman Sachs Group Inc., raised about $210 million from Luckin stock disposals over the past two months, people familiar with the matter said. Luckin Chairman Lu Zhengyao defaulted on $518 million of margin debt in early April, Goldman said in a statement at the time, after revelations of accounting fraud caused shares of the Chinese coffee chain to plunge.The stock sales represent the latest attempt by Lu’s creditors to limit losses from a scandal that has fueled calls in Washington for tougher scrutiny of financial ties between the U.S. and China. Luckin’s fall from grace blindsided some of the biggest names on Wall Street just as they were gearing up for a historic expansion into Asia’s largest economy.Spokespeople for the lenders declined to comment. Luckin didn’t immediately respond to multiple requests.Goldman, tapped by lenders to oversee the stake disposal, said in April that it would sell as many as 76.35 million of Luckin’s U.S.-listed shares. The firm has now liquidated the entire position, one of the people said, asking not to be identified discussing private information.A back of the envelope calculation suggests the shares were sold for $2.75 apiece on average. That compares with the closing price of $26.20 before the Luckin scandal emerged and the $3.18 average price since April 6, when Goldman announced plans to offload the stake.Credit Suisse and Morgan Stanley each put up about $97 million for the margin loans, while Haitong International lent about $134 million, one of the people said. Goldman and Barclays Plc lent $73 million and $78 million, respectively, while China International Capital Corp. contributed $39 million.It’s still unclear whether the banks will ultimately lose money. They’re also pursuing the assets of an investment company controlled by Lu’s family trust, Bloomberg News reported last month. The investment company has disputed that it’s in default and has requested an injunction in Hong Kong to prevent liquidation proceedings, according to a May 6 court filing.Lu became a billionaire after his fast-growing Starbucks rival went public in the U.S. last year. Much of his wealth has since been wiped out by the 85% plunge in Luckin’s stock since April, when the company disclosed that some of its employees may have fabricated billions of yuan in sales.Chinese regulators have obtained emails purporting to show Lu instructed financial fraud, business news outlet Caixin reported this month, citing unidentified people close to the agencies. Regulators found evidence of fraud at Luckin in their investigation, Caixin cited several people as saying.Lu has previously denied deceiving investors. “My personal style may have been too aggressive and led the companies to run too fast, which has triggered many problems,” he said in a statement last month. “But I never lied to investors with the idea of ‘selling concepts.’ I’m working hard to make the company bigger and better to create value for society.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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Fracking pioneer Chesapeake Energy Corp (CHK) is preparing to file for bankruptcy as soon as this week, three people familiar with the matter have told Reuters.According to the Reuters sources, CHK is now wrapping up negotiations for a $900 million debtor-in-possession loan. It is also discussing with creditors the potential to “roll up” its existing debt and make it part of the bankruptcy loan, bringing the total debtor-in-possession financing closer to $2 billion, the sources said.At the same time the company is also looking for an equity infusion from creditors. Chesapeake plans to file for bankruptcy on Thursday, but if the financing required further discussions this could move to next week, the sources added.If the company lives on post-bankruptcy, creditors like Franklin Resources Inc will take over Chesapeake in exchange for deleting over $7 billion of debt, Reuters reports.With a massive debt burden of around $9 billion, CHK missed an interest payment on Monday, the sources said, and there is another payment-date fast approaching on July 1.Unsurprisingly, the stock shows a Strong Sell Street consensus, with 5 recent sell ratings vs just 1 hold rating. Meanwhile the average analyst price target stands at $16.50 (13% downside potential).Shares have plunged a whopping 89% year-to-date, with the oil and gas giant reporting a “going concern” warning in its May quarterly financial filing.“We do not expect [Chesapeake] to be in compliance with its financial covenants beginning in Q4 2020, which would result in an act of default on the credit facility,” CFRA analyst Paige Meyer told investors back in May.“With a default on the credit facility, we believe other lenders are likely to call debt due as well using ‘cross default’ clauses.” She downgraded the stock to Strong Sell with a $0 price target. (See Chesapeake stock analysis on TipRanks).Related News: Debt-Laden Chesapeake Rolls Out $25 Million Incentive Executive Pay Plan Chesapeake Energy Gearing Up For Bankruptcy Filing- Report Bankrupt Hertz Tanks 24% Amid Plans To Sell $500 Million In New Shares More recent articles from Smarter Analyst: * Facebook’s WhatsApp Rolls Out Digital Payment Service In Brazil * Delta To Add 1,000 Flights In July; Resuming China Flights Next Week * United Airlines Secures $5 Billion Loan To Shore Up $17 Billion Liquidity Chest * Nio Completes $428M ADS Offering, Stock Now Up 70% YTD