Renewcell had previously warned of difficulties it was facing as a result of slowing demand. Credit: Getty Images

To address the immediate liquidity requirement, Renewcell shared it will be receiving SEK50m from its major shareholders H&M Fashion AB and Girincubator AB, as a short-term loan. It will also receive an additional SEK50m from its existing lenders.

Renewcell believes the financial arrangement will resolve its short-term liquidity need, which it claims is caused by slower-than-expected sales in the textile value chain.

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The company says its strategic review remains ongoing, with a longer-term aim of securing long-term financing in the first quarter of 2024.

Additionally, Renewcell said it has signed a “non-binding” term sheet with the Swedish fashion retailer H&M Group. Under this arrangement, the H&M Group intends to acquire 7,000 metric tons of fibre containing circulose pulp through its supply chain in 2024 and 11,000 metric tons in 2025.

However, Renewcell noted that negotiations with H&M will determine the details of a binding off-take agreement, including prices.

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This news comes after Renewcell initiated a strategic review in late November to explore and evaluate funding options following lower-than-expected sales volumes to fibre producers in its third quarter as well as subdued sales in October.

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The company, which produces a trademarked dissolving pulp made from 100% textile waste called Circulose, generated a net loss of SEK94.5m ($8.68m) between July and September 2023 – somewhat far from its hope of reaching break-even on a cash flow basis by the end of the year.

In the past year, the company has been ramping up production significantly, from 3,388 tonnes in Q1 to 7,554 tonnes in Q3.

Magnus Håkansson, Renewcell’s acting CEO, said at that time, while the company can produce sufficient volumes (4,000 tonnes per month) to break even, “the demand in terms of hard orders from the brands is coming along with less urgency than we had expected.”