Under the agreement, Lycra aims to establish a new “sustainable capital structure” intended to recapitalise the company and support its financial stability.
To implement these measures, Lycra and certain affiliates have filed a voluntary prepackaged Chapter 11 case in the US Bankruptcy Court for the Southern District of Texas.
The company said this move follows several months of discussions with major financial creditors and expects to conclude the restructuring process within 45 days due to the near-unanimous support of stakeholders.
The restructuring plan has gained substantial approval from holders of Lycra’s senior secured term loan, 16.000% Senior Secured Notes, and 7.500% Senior Secured Notes, with these groups agreeing to back the proposed plan of reorganisation.
Lycra is seeking standard "first day" relief from the court to allow it to continue regular business operations throughout the restructuring period.
As part of these initial motions, the company intends to continue paying all valid debts owed to suppliers and vendors in full during normal business activities.
To secure ongoing operations, Lycra has secured commitments for $75m in debtor-in-possession financing and exit financing of over $75m.
The exit facility is expected to refinance the debtor-in-possession funds, providing capital once the Chapter 11 process concludes. Certain Lycra entities are not included in the Chapter 11 filing.
Lycra CEO Gary Smith said: “The Lycra Company’s products have long been a symbol of quality, delivering benefits like lasting comfort, fit, and performance across a wide variety of apparel and personal care applications.
“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. 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 company has engaged Linklaters and Haynes Boone as legal advisers, Houlihan Lokey as investment banker, and FTI Consulting as financial and communications adviser.
In November last year, the company opened its largest spandex production facility in China as part of its ongoing investment in the Chinese market.
