Lycra enters restructuring to eliminate 1.2 billion dollars in debt

US-based fiber and technology provider Lycra has announced a restructuring support agreement (RSA) with a significant majority of its creditors. The move aims to eliminate approximately 1.2 billion dollars of long-term debt and establish a sustainable capital structure to position the firm for long-term financial stability.

The RSA has received support from holders of the company senior secured term loan, 16 percent senior secured notes, and 7.5 percent senior secured notes. These stakeholders have agreed to vote in favour of a prepackaged plan of reorganization. To implement this, Lycra and certain affiliates filed a voluntary prepackaged Chapter 11 case in the US Bankruptcy Court for the Southern District of Texas.

Expedited timeline for financial recovery

Management expects to complete the financial restructuring expeditiously due to the near-unanimous support from stakeholders. The company anticipates emerging from the Chapter 11 process within 45 days. This consensual agreement follows several months of discussions regarding the recapitalization of the business.

Lycra chief executive officer, Gary Smith, stated that the day marks a significant milestone as the company takes decisive action to reduce debt and strengthen its financial foundation. Smith noted that by taking this step, the company will continue serving customers and supporting partners with high-quality products.

Operational continuity and liquidity measures

The company is seeking customary ‘first day’ relief to ensure it can operate in the ordinary course of business throughout the restructuring process. As part of these motions, Lycra will seek approval to pay all valid amounts owed to vendors and suppliers in full.

To support ongoing operations, the company has obtained commitments for 75 million dollars in debtor-in-possession (DIP) financing. Additionally, more than 75 million dollars in exit financing has been secured to refinance the DIP financing upon completion of the Chapter 11 process, providing the company with necessary capital for its next phase of growth.