The Wall Street Journal - 07.04.2020

THE WALL STREET JOURNAL. Tuesday, April 7, 2020 |B3

BUSINESS NEWS

BUSINESS WATCH

AUTO INDUSTRY

Fiat and Honda Keep

Plants Closed Longer

Fiat ChryslerAutomobiles NV

andHonda MotorCo. are extend-

ing some North American factory

closures through early May.

Fiat Chrysler said Monday it

plans to progressively restart

plants in the U.S. and Canada be-

ginning May 4, while its Mexico

facilities will be addressed sepa-

rately.

Honda’s U.S. and Canadian fac-

tories will remain shut through

May 1, the Japanese auto maker

said Monday.

Both companies moved last

month to close plants and send

workers home in an attempt to

curb the spread of the new coro-

navirus. Since then, consumer de-

mand for new cars has fallen pre-

cipitously.

Fiat Chrysler had previously in-

tended to reopen plants as early

as April 14, while Honda’s were

set to open April 10.

Closing plants is an immediate

hit to the bottom line, as car

companies book revenue when

vehicles are shipped to dealers

from the factory.

—Nora Naughton

and Ben Foldy

AIRBUS

Production Halted

At U.S. Jet Factory

AirbusSE is pausing produc-

tion at its Mobile, Ala., plant, where

it manufactures the A320 and

A220 families of single-aisle jets.

The pause is slated to begin

this week and will continue until

April 29. The company has 1,100

permanent employees at the site.

They will take paid leave during

the period.

The halt is in response to high

inventory levels at Airbus facto-

ries, as airlines across the globe

defer taking deliveries of aircraft,

as well as government safety rec-

ommendations in the wake of the

pandemic. Two additional plants

in Germany--in Bremen and

Stade, where Airbus employs

about 4,600 staff combined--will

also be temporarily halted, Airbus

said on Monday.

Aircraft and wing production in

the U.K., Canada and Spain have

also been paused due to high

stock and government restrictions

while factories in France were

shut to implement new health

measures before gradually re-

starting production beginning

March 23.

—Benjamin Katz

APPLE

Tech Giant to Make

A Million Face Shields

AppleInc. and its suppliers
have begun producing face shields
for health workers, which the
company designed to pack flat
and assemble in under two min-
utes, said Chief Executive Tim
Cook in a video posted Sunday on
Twitter.
The tech company said that it
plans to make one million of the
face shields weekly using materi-
als and manufacturing facilities
from the U.S. and China. The first
shipment went to Kaiser Perma-
nente hospitals in Santa Clara
County, Calif., where Apple is
based. It initially will distribute the
shields across the U.S. but hopes
to expand distribution later to
other countries.
In addition to the shields, Mr.
Cook said Apple has gathered and
donated more than 20 million
masks in the past month, adding
that the company is working with
governments world-wide to give
the masks to “places of greatest
need.”
—Tripp Mickle

RAVN AIR

Alaska-Based Carrier

Files for Bankruptcy

Alaska’sRavn AirGroup Inc.,
an airline with more than 70
planes, has filed for bankruptcy,
saying its business has dried up
and it has run out of cash in the
wake of the novel coronavirus.
The Anchorage-based carrier
said it applied for aid last week
under the $2 trillion stimulus re-
cently approved by Congress,
but it is unsure whether or
when it will get the financing.
Government assistance will
be key to helping Ravn Air re-
sume operations and rehire the
roughly 1,300 employees it has
laid off as a result of the pan-
demic-related business interrup-
tions, the company said Sunday
in a filing.
The company hasn’t ruled out
ultimately selling the business or
liquidating it, court papers said.
Ravn Air was formed through
the combination of several Alas-
kan airlines. It is majority-owned
by private-equity firms J.F. Leh-
man & Co. and W Capital Part-
ners.
—Becky Yerak

The iPhone maker sent its first shields to hospitals in California.

VANESSA CARVALHO/ZUMA PRESS

tors and opened more than

4,500 stores across China,

overtaking Starbucks in the

country by the end of 2019.

Some of the world’s largest

investors were drawn in by the

company’s rapid growth and

business model of wooing cus-

tomers with coupons and

deliveries of freshly brewed

coffee made from what Luckin

said were premium Arabica

coffee beans.

Credit Suisse AG’s Singapore

branch is the trustee holding

the Luckin shares on behalf of

the lenders looking to sell. The

Swiss bank was also the lead

bookrunner of Luckin’s IPO and

helped the company raise

additional funds from investors

in a follow-on share offering

and a sale of convertible bonds

in January. A Credit Suisse

spokesman declined to

comment.

filed in January. More forced

sales could weigh on Luckin’s

stock price and lead to more

margin calls and loan defaults.

As of January, Mr. Lu con-

trolled about 36.8% of the com-

pany’s shareholder voting

rights, while Ms. Qian had

23.7% of the voting rights.

Goldman said Monday that

even if all the shares backing

the $518 million margin loan

are sold, Mr. Lu’s voting inter-

est in the company wouldn’t

decrease, but Ms. Qian’s would

decline significantly. The com-

pany has two classes of shares

with different voting rights.

From its founding in 2017,

Luckin took less than 18

months to achieve a Nasdaq

initial public offering, one of

the fastest ascensions by a

startup globally. The company

raised more than $2 billion

from private and public inves-

protect themselves from mar-

ket price declines. At the end of

2019, when Luckin’s U.S. shares

were trading at about $39

apiece, the collateral backing

the $518 million loan was val-

ued at about $3 billion.

The margin-loan default

could be one of a string of simi-

lar defaults by other Luckin

shareholders. The company’s

management and their family

members have pledged other

shares as collateral for borrow-

ings, according to a prospectus

Thursday by disclosing that as

much as 2.2 billion yuan ($310

million) in sales from the sec-

ond quarter to the fourth quar-

ter of last year were fabricated

by some employees. It has sus-

pended its chief operating offi-

cer and several staffers.

The falsified sales repre-

sented close to half of Luckin’s

reported or projected revenue

for the nine-month period.

Luckin’s U.S. shares, which were

trading above $26 before the

news, lost nearly 80% of their

value in two days last week.

The forced sale of the

Luckin shares, which is the re-

sult of a margin call, shows

how badly the banks were

blindsided by the company’s

recent revelations.

Lenders typically build in a

large cushion between the size

of their loan and the value of

the collateral securing it, to

and a Goldman spokeswoman

declined to say if the investment

bank was among them.

The securities pledged to-

ward the loan are held by Mr.

Lu and Jenny Zhiya Qian,

Luckin’s chief executive officer.

The two are co-founders of the

company, which had quickly

emerged as a rival toStar-

bucks Corp. in China. The

pledged shares were recently

valued at about $410 million,

based on Luckin’s closing price

of $5.38 per American deposi-

tary share on Friday.

The Nasdaq-listed shares

sank further Monday, falling

18% to $4.39, giving Luckin a

market capitalization of about

$1.1 billion.

A spokesman for Luckin de-

clined to comment.

The embattled company,

which is based in Xiamen,

China, stunned investors on

Banks stand to lose more
than $100 million from a loan
they made to the chairman of
Luckin CoffeeInc., whose share
price plunged after the Chinese
coffee chain last week said much
of its 2019 sales were fabricated.
On Monday,Goldman Sachs
GroupInc. said an entity con-
trolled by Luckin Chairman
Charles Zhengyao Lu defaulted
on a $518 million margin loan
facility. It said a group of lend-
ers is putting 76.3 million of
the Chinese company’s Ameri-
can depositary shares—repre-
senting the collateral for the
loan—up for sale.
Goldman said it is acting as a
“disposal agent” for the lenders,
meaning it is helping to facilitate
the share sale in one or more
transactions. The identities of
the lenders wasn’t disclosed,

BYJINGYANG

Loan to Luckin Chairman Could Cost Banks Millions

80%

Theapproximatedropinvaluein

Luckin’sU.S.sharesintwodays

SeaWorld’s CEO Leaves Post

After Five Months at the Helm

SeaWorld EntertainmentInc.
said Chief Executive Sergio Ri-
vera has resigned from the com-
pany after being in the post for
about five months.
The theme-park company
said Finance Chief and Treasurer
Marc Swanson is serving as in-
terim chief executive, while Chief
Accounting Officer Elizabeth
Castro Gulacsy is stepping in as
interim finance chief and trea-
surer. SeaWorld also appointed
Walter Bogumil, the company’s
chief strategy officer, as its chief
operating officer.
The departure on Saturday of
Mr. Rivera, a former timeshare-
resort executive who took up
the position in November, comes
after a string of leadership
changes in the past few years.
Gustavo Antorcha, Mr. Rivera’s
predecessor, resigned from Sea-
World in September, seven
months after taking the helm at
the Orlando, Fla., company. Mr.
Swanson stepped in as an in-
terim CEO then, too.
Mr. Rivera resigned over dis-
agreements on the board’s in-
volvement in decision making,
the company said in a securi-

ties filing.

SeaWorld has been grappling

with falling attendance and

deeper losses after a 2013 docu-

mentary, “Blackfish,” chronicled

the company’s practices related

to its treatment of captive or-

cas, also known as killer whales.

The company in February said

it would pay $65 million to set-

tle claims that it violated securi-

ties laws by not being up front

with investors about the effect

the critical documentary had on

its business.

In 2018, James Atchison, who

resigned as chief executive in

2014, settled for more than $1

million with the Securities and

Exchange Commission on similar

charges related to “Blackfish.”

The company also said Mon-

day that executive officers are

cutting their base salaries by

20% until its parks resume nor-

mal operations, as the coronavi-

rus pandemic has led to park

closures.

SeaWorld last month said it

was furloughing more than 90%

of its staff as of the start of

April.

—Dave Sebastian TNS/ZUMA PRESS

Data as of 12/31/19.^1 Represents PFI’s asset management expertise through PGIM and its affiliates and its

predecessors. For additional information related to market cycles visit: http://www.nber.org/cycles.

© 2020 Prudential Financial, Inc. (PFI) and its related entities. PGIM, Inc., is the principal asset management

business of PFI and is a registered investment advisor with the US Securities and Exchange Commission. PGIM is a

trading name of PGIM, Inc. and its global subsidiaries. The PGIM logo and the Rock symbol are service marks of PFI

and its related entities, registered in many jurisdictions worldwide.

FIXED INCOME | EQUITIES | REAL ESTATE | ALTERNATIVES | PRIVATE CREDIT | QUANT SOLUTIONS

OUTLAST.

THEVALUEOFALONG-TERMPERSPECTIVE.RIGHTNOW.

INVESTMENTEXPERIENCETHROUGH30MARKETCYCLES^1

PORTFOLIOMANAGERSWHOAVERAGE23YEARS’TENURE

200INSTITUTIONALCLIENTSFOR20+YEARS

Ittakesconvictiontoseebeyondthevolatilityintoday’s

markets.PGIMbringsexpertiseacrossassetclasses

andriskmanagementrigortothesearchforconsistent

long-termreturns.

FindoutmoreatPGIM.com/longtermism