On Friday, RuiXing Coffee announced that it is filing for Chapter 15 bankruptcy protection in the United States to allow it to reorganize financially, but all of its coffee chains will remain open.
In a statement released Friday (Feb. 5) via its social media accounts, RuiXing said the move was “good news” and would not have a significant impact on the company’s day-to-day operations, as the Chapter 11 filing would allow RuiXing Coffee to reorganize in China while suspending the U.S. creditors’ lawsuit against the company to allow it to complete its reorganization in its domicile, the Cayman Islands. The bankruptcy protection filing will allow RuiXing Coffee to restructure in China while suspending U.S. creditors’ lawsuits against the company, creating the conditions to complete its reorganization in its domicile in the Cayman Islands.
A statement from RuiXing Coffee said, “The company will continue to meet its transaction obligations in its day-to-day operations, including payments to suppliers and employees.”
As of Nov. 30, 2020, RuiXing Coffee had 3,898 stores and an additional 894 “affiliated” stores, and the chain has gained customers by offering deep discounts and is seeking to reach 10,000 stores by the end of 2021.
Bloomberg reported on Feb. 5 that the U.S. Securities and Exchange Commission (SEC) fined RuiXing $180 million in December 2019 after finding that it falsified more than $300 million in sales between April 2019 and January 2020, but the company never formally admitted or denied the SEC’s charges, once seen as a challenger to Starbucks in the Chinese market.
The SEC said RuiXing allegedly misrepresented revenue, expenses and operating losses, among other misconduct, all in an effort to create the false impression to investors that the company was growing at a miraculous rate.
RuiXing went public in New York in 2019, and the stock was subsequently delisted from Nasdaq after its accounting scandal over falsified sales shocked Wall Street when it came to light.
Yu Jian, general manager of Greater China at Kantar Worldpanel, said filing for bankruptcy does not mean RuiXing will close its doors; it can use it to scrap its debt, close some unprofitable businesses and focus on its core business.
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