Spandex and apparel fiber maker The Lycra Company has entered a Chapter 11 restructuring support agreement with its creditors that will help erase around $1.2 billion in long-term debt while establishing a sustainable capital structure.
The voluntary prepackaged Chapter 11 case was filed in the United States Bankruptcy Court for the Southern District of Texas, with the company’s lenders agreeing to provide $75 million in debtor-in-process financing to help wipe out $1.53 in debt. The Lycra Company anticipates emerging from bankruptcy within 45 days.
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“Today marks a significant milestone for The Lycra Company as we are taking decisive action to meaningfully reduce our debt and strengthen our financial foundation,” said Gary Smith, CEO of The Lycra Company. “By taking this step, we will continue serving our customers, supporting our partners, and providing the high-quality products on which they rely. I want to thank our team members for their ongoing dedication and our loyal customers and partners for their continued support throughout the process.”
The Lycra Company is seeking customary “first day” relief that will enable it to operate normally during the restructuring process. As part of that first day motion, the company will seek approval to continue to pay all valid amounts owed to vendors and suppliers in full. Along with the $75 million in debtor-in-process financing, the company also obtained commitments for more than $75 million in exit financing, which will refinance the debtor-in-process financing and provide Lycra with capital once the Chapter 11 process is completed.
The filing comes after years of unsteady financial footing for the Delaware-based company, following its 2019 acquisition by Chinese textile operation Shandong Ruyi Textile and Fashion International Group Limited. In 2022, Shandong Ruyi’s creditors took full equity control of the company after the parent group defaulted on a $400 million loan. Those creditors included Hong Kong-based China Everbright Ltd., Tor Investment Managment and Seoul-based private equity firm Lindeman Partners along with its affiliate, Lindeman Asia.
In November, The Lycra Company opened its largest Spandex production plant in the Ningxia Hui Autonomous Region of China. Backed by an 800 million Chinese renminbi ($112 million) investment, the facility had an initial output capacity of 30,000 tons of Spandex production, with an anticipated capacity of more than 120,000 tons per year.
Earlier this year, The Lycra Company teamed with lingerie brand Triumph and Italy-based RadiciGroup for a new recycling process designed specifically for mixed-fiber textiles. The project would allow RadiciGroup to treat mixed-textile waste and recover Lycra and nylon fibers for use in new garments.
The Lycra Company pointed to a number of factors, including tariffs, increased competition, decreased demand and ongoing legal issues with its former owners, as drivers of its continued financial trouble following its most recent change in ownership. Along with its Delaware headquarters, the company operates eight manufacturing facilities, three research labs and 11 offices with around 2,000 total employees across Asia, Europe and North and South America. The Lycra Company said it doesn’t expect the restructuring to disrupt those operations or its relations with customers and vendors.
