The Lycra Company has taken a major step to overhaul its balance sheet, announcing a restructuring support agreement with most of its creditors that is intended to eliminate roughly $1.2bn of long-term debt. The company said the deal is designed to create a “sustainable capital structure” that recapitalises the business and strengthens its financial footing.
To put the plan into effect, Lycra and certain affiliates have initiated a voluntary, prepackaged Chapter 11 case in the US Bankruptcy Court for the Southern District of Texas. Lycra said the filing follows months of negotiations with key financial creditors and is expected to be completed quickly within about 45 days given the near-unanimous backing already secured from stakeholders.
According to the company, strong support has been obtained from holders of its senior secured term loan as well as investors in its 16.000% Senior Secured Notes and 7.500% Senior Secured Notes, with these groups agreeing to endorse the proposed plan of reorganisation.
During the Lycra Chapter 11 restructuring, the company said it will seek typical “first day” court approvals so operations can continue without interruption. As part of those initial requests, Lycra plans to maintain ordinary-course payments and pay all valid obligations to suppliers and vendors in full through normal business activity.
To fund operations while the process runs, Lycra said it has lined up $75m in debtor-in-possession financing and more than $75m in exit financing. The exit facility is expected to refinance the DIP funding once the Chapter 11 case concludes. Lycra added that certain 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 said it has appointed Linklaters and Haynes Boone as legal counsel, Houlihan Lokey as investment banker, and FTI Consulting as financial and communications adviser.
Headquartered in Wilmington, Delaware, the business develops fibre and technology solutions for apparel and personal care end markets. Its portfolio of consumer-facing fibre brands includes Lycra, Lycra HyFit, Lycra T400, Coolmax, Thermolite, Elaspan, Supplex and Tactel. As the Lycra Chapter 11 restructuring proceeds, the company says it intends to keep serving customers and partners while working to emerge with a more stable capital structure.