Tick Tock: Renewcell Has Less Than 2 Weeks to Find a Buyer

Jasmin Malik Chua
·7 min read

One of the tragedies of Renewcell’s sudden and unexpected unraveling is that it was neither sudden nor unexpected. Its financial and liquidity woes, in fact, played out publicly and in real-time.

The Swedish textile recycler wasn’t bluffing, as it turned out, when it issued a warning in October that it wouldn’t break even in the fourth quarter due to sluggish sales. Neither was it kidding around when it announced the following month that it was initiating an urgent “strategic review” because it was hemorrhaging some 94.5 million Swedish kronor, or $9.1 million, in cash, resulting in a net debt of 905 million kronor, or more than $87 million. Renewcell then noted, with controlled but growing alarm, that the 100 million kronor ($9.6 million) in short-term loans it managed to clinch in the lead-up to Christmas, would only keep it chugging along for the next few months. In January, the Circulose maker revealed that it was dismissing one-quarter of its workforce and slashing production volumes to a fraction of its annual 60,000-metric-ton capacity in a last-ditch effort to salvage 35 million kronor ($3.4 million) in reduced personnel and other operating costs.

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By February, it had declared bankruptcy. Talks with a potential new investor had fallen through and Renewcell was out of runway. Zara owner Inditex’s commitment in October to buy up the first 2,000 metric tons of Circulose-blended fiber from Tangshan Sanyou didn’t make a material difference to its finances because the pulp had already been sold. H&M Group’s non-binding agreement to acquire 7,000 metric tons of Circulose-containing fiber in 2024 and 11,000 metric tons in 2025, also didn’t solve its immediate-term issues.

If this isn’t fodder for a book, then it’ll at the very least be a case study for some business sustainability course, said Tricia Carey, chief commercial officer at Renewcell. “You’ve been there,” she told a reporter. “It was real, it was big, it was there.” And soon it might not be.

Carey is hanging on to whatever shred of hope is left. The Stockholm District Court, which greenlit Renewcell’s bankruptcy application last week, has appointed an administrator named Lars-Henrik Andersson to look for a buyer who can snap up the company’s Sundsvall plant and patent. The timeline is fairly tight: Any bids will have to come in before March 15, though the process of winding up the existing business will take another six months.

“We’ve had quite a few inquiries,” Carey said. “I’ve had quite a few that are coming through LinkedIn or our network.”

But Renewcell will be retrenching all of its 120 employees “very, very soon,” albeit with the “potential to be rehired if a new buyer comes on and they want to rehire us,” said Shannon Welch, the company’s global brand director. In a worst-case scenario, the firm will be sold off in pieces.

The upshot, if one remains, is that Renewcell still has roughly 4,000 metric tons of fiber sitting with producer partners like Tangshan Sanyou, Yibin Grace and Birla Cellulose in China, India, Pakistan and Turkey, plus another 14,000 metric tons in dissolving pulp, enough to keep its sprawling supplier network going for the next 18 to 24 months. The Circulose name is trademarked until at least 2028—2030 in some countries. Development of viscose made with Circulose can and should continue, Welch said. So far, no brand has moved to cancel its preexisting orders, so “everyone is trying to move forward.”

“We’re not dead in the water just yet,” she said. “Hopefully, there is a light at that tunnel, where we get a good buyer and Renewcell comes out of this with some key learnings. But, of course, it’s a very uncomfortable time.”

Carey, with the benefit of hindsight, thinks that Renewcell could have worked harder on diversifying its mix, not only by creating a broader assortment of brands beyond its core group of H&M, Inditex, Calvin Klein parent PVH Corp. and Levi Strauss & Co., but also by complementing textiles for apparel with paper, packaging, home and nonwovens.

Going public so early could also have been a mistake. “Being a publicly listed company makes it very challenging because you’re always trying to get this information out,” she said. “It’s dissected in many different ways, you have to have more staff to manage investor relations, you have to do more reporting.”

Even so, the industry has to “change a bit more” and look at innovations in a different way, Carey said. This includes larger companies building the appropriate infrastructure and organizational management to work with innovators as they move from the pilot or capsule stage to commercial scale at a cadence that might be slower or require more finessing than they’re used to, particularly if the technology isn’t a perfect drop-in substitution. A lot of it has to do with setting the right expectations, she said, which also means brands “stepping up” with letters of intent or offtake agreements that signal to the financial end of the market that such developments are necessary.

In the end, an inflationary environment exacerbated by geopolitical volatility and an uncertain outlook proved to be Renewcell’s undoing. At the fiber level, Circulose is 30-40 percent pricier than conventional viscose. Even though this breaks down to 3-5 percent of the total cost of the final garment, few are willing to pony up at a time when margins are under duress. (See former alternative-leather pack leader, Bolt Threads, which indefinitely paused production of Mylo last year due to a similar cash crunch.)

“Everything’s come down to price, whereas that’s completely at odds with fulfilling sustainability goals,” Welch said. “Everyone talks about the triple bottom line, but who’s actually implementing that in their business?”

Renewcell’s loss would be a self-inflicted wound at a time when extended producer responsibility legislation, coupled with a ban on the destruction of clothing, is coming down the European Union pipeline. A study published by the European Environmental Agency on Monday estimates that 4-9 percent of all textile products placed on the European market are destroyed before use, amounting to between 264,000 and 594,000 metric tons of textiles either buried or incinerated every year. Returned and unsold textiles present a challenging and expensive problem. An estimated one-third of all returned clothing bought online in the continent, for instance, ends up being destroyed.

A looming 133 million-ton deficit of so-called “preferred” raw materials by 2030 when regulations governing greener product design are coming into play presents an additional pitfall, particularly if, as some fear, the bankruptcy will have a chilling effect on less mature next-generation innovations that don’t immediately command a premium because they‘re replacing tonier incumbents like fur or cowhide. (Counterpoint: Bolt Threads, which has pivoted to beauty.)

To be fair, it can’t just be brands’ responsibility, Welch said. Policy and legislation with baked-in transition funds, government subsidies and tax incentives, are instrumental, too.

“You look at other industries like solar and electric vehicles and how they are now at price parity because of all of the subsidies,” she said. “I think that one thing that’s been really missing from the industry at large is what is our strategy to achieve that purpose? Instead of it just being hundreds of individual players trying to do their part. And now it’s kind of a big wake-up call that there needs to be all of these things in place for us to be able to make a jump as an industry.”