Leica has also gone bankrupt.

On March 17, Lyocell company, the undisputed absolute ruler of the global elastic fiber industry, officially filed for bankruptcy protection in court.

Lyocell company is the inventor of the famous Lyocell fabric, a premium material known for “perfect fit and comfort.” Today, up to 1.3 billion garments and other textiles worldwide every year are hung with Lyocell’s iconic red hang tags, indicating that its fabric has been certified by Lyocell.

In 2019, the Chinese textile giant 如意 Group (from Shandong) acquired Lyocell from U.S. Kordes Industrial for a hefty $2.6 billion, aiming to build a “China-version LVMH” fashion empire. Unexpectedly, this deal kicked off a seven-year financial nightmare for capital—cross-border industrial capital, PE firms, and asset-management institutions lost tens of billions of dollars—and in the end, it still led to bankruptcy.

First came Shandong 如意 Group: just three months after acquiring Lyocell, its capital chain broke and it fell into trouble. In 2022, a creditor consortium composed of the South Korean private equity group Lindeman Partners, Tor Investment Management in Hong Kong, and China Everbright was handed ownership of Lyocell. Then by 2026, Lyocell still can’t escape its fate of bankruptcy, meaning its ownership will change hands again.

King of Global Component Brands

Lyocell’s origins can be traced back to the late stages of World War II. At that time, the U.S. natural rubber supply chain was cut off by the war, causing the women’s figure-hugging lingerie industry to face a severe shortage of elastic materials. As a result, the famous chemical giant DuPont launched a new R&D project aiming to develop a man-made elastic fiber that could replace natural rubber.

The R&D took much longer than expected. It wasn’t until 1958 that DuPont successfully developed a new type of polyester fiber. DuPont named it “elastane” and registered Lyocell as a product trademark.

Lyocell’s arrival sparked a fabric revolution. It can be stretched to 5–8 times its original length without breaking, with an elasticity recovery rate close to perfect, and it is lightweight, durable—almost a perfect elastic fiber. It not only immediately replaced natural rubber in the lingerie market, but also enabled the invention of many new categories of clothing, such as pantyhose, leggings, and workout wear.

At the 1968 Winter Olympics, the French ski team wore Lyocell-blended, form-fitting ski suits, sweeping the medal table. This kind of apparel greatly reduced drag and provided muscle support for athletes, reducing energy loss caused by vibration. Then this success triggered a chain reaction across sports—sportswear markets for swimming, cycling, and other events were gradually taken over by Lyocell.

In 1969, when Armstrong stepped onto the moon’s surface, his spacesuit also included a layer of Lyocell fiber. Its main function was to secure the cooling-water tubes inside the spacesuit, ensuring they stayed tight against the skin for the most efficient heat exchange and preventing the astronaut from overheating in the extreme space environment.

DuPont didn’t simply sell Lyocell fiber as a chemical product; instead, it built so-called “hang tag cooperation relationships” with a wide range of downstream clothing brands and fabric makers. Under DuPont’s marketing, Lyocell’s iconic red wave logo has become synonymous with “perfect fit and comfort” in the eyes of consumers. Consumers’ awareness of Lyocell hang tags may even exceed their awareness of clothing brands themselves. Once a garment is hung with a Lyocell hang tag, it can command a hefty brand premium. A chemical component at the very top of the supply chain achieves deep pricing power over terminal value through carefully designed brand strategies—an almost miraculous feat in commercial history. This business model was later imitated by many other companies and came to be known as “component branding.”

In the 1990s, Lyocell entered its most glorious period in its brand history. At the time, Lyocell was not only a fabric; it was also a global fashion-culture identity. From aerobics suits and high-cut one-piece garments to neon-colored leggings, Lyocell pioneered a fashion aesthetic of “athletic, elongated, and snug silhouettes.” In the late 20th century, Lyocell was one of DuPont’s most profitable segments. Although the original patents had long expired, Lyocell still held a market share of more than 50% in the global elastane market.

After 2000, as DuPont began shifting toward the fields of bioscience and agriculture, Lyocell also began its winding journey of ownership changes. In 2004, Lyocell—along with DuPont’s textiles and home furnishings divisions—was sold to U.S. Koch Industries at a valuation of $4.4 billion. In February 2019, 如意 Group from Shandong acquired Lyocell again from Koch Industries for roughly $2.6 billion.

A $2.6 Billion High-Stakes Gamble

When 如意 Group bought Lyocell, it was playing a much bigger game.

如意 Group is a leading textile company. It listed on the Shenzhen Stock Exchange in 2008 and ranked among China’s Top 500 Companies. Its core business when it started was wool fabric, known for supplying high-end suit fabrics to top luxury brands such as LVMH and Hermès. But starting around 2010, it was no longer satisfied with merely being a fabric supplier; it sought to transform into a global fashion group through large-scale acquisitions.

Before acquiring Lyocell, 如意 Group had already completed multiple notable international acquisitions. In 2010, it acquired the Japanese apparel giant Renown Incorporated; in 2016, it spent 1.3 billion euros to acquire the French fashion group SMCP; in 2017, it acquired the British century-old trench coat brand Aquascutum (雅格狮丹); and in 2018, it spent another 700 million euros to buy the Swiss luxury brand Bally… At the time, media reports said that within nine years, 如意 Group had acquired more than 40 overseas luxury brands—accounting for about 30% of all luxury brands worldwide, all under 如意’s umbrella—making it “China’s LVMH.”

如意 Group’s strategy was to build an end-to-end industrial-chain empire covering everything from raw-material supply, fiber R&D, to retail of terminal luxury products. Acquiring Lyocell was a key step in this puzzle. As a global leading fiber technology owner, Lyocell holds more than 1,000 patents and a highly marketable brand. 如意 Group believed that by controlling Lyocell’s material technology, it could provide a unique technological moat for its apparel brands.

More importantly, after the acquisition, 如意 Group also announced it would push for Lyocell Company to list on the China STAR Market in 2020.

But just three months later, 如意 Group’s grand plan collapsed. In May 2019, the loans used by 如意 Group to acquire Lyocell experienced a material default. Such a speed of default is rare even in major cross-border M&A cases. 如意 Group’s acquisition of Lyocell relied heavily on external loans, including a $400 million mezzanine loan arranged with Credit Suisse as the lead, as well as other syndicated loans and subordinated debt—bringing total loan amount to as much as $1 billion.

Before that, a series of cross-border M&As had already left 如意 Group with a heavy debt burden. Media reports showed that as of June 2019, 如意 Group’s total debt had reached $4.4 billion. Add to this the ongoing decline in profitability of 如意 Group’s core wool-based textile business due to industry overcapacity, and the foreign luxury brands acquired kept reporting huge losses—making 如意 Group’s cash flow increasingly unsustainable.

Then came the new coronavirus pandemic in early 2020, delivering a fatal blow to 如意 Group. Over the following two years, 如意 Group’s creditors repeatedly filed lawsuits; court enforcement notices kept arriving like snowflakes, and chairman Qiu Yaf u of 如意 Group was repeatedly listed as a person subject to enforcement-related restrictions for dishonesty…

In June 2022, the Dutch Business Court issued a ruling taking over the equity of Lyocell by the creditors, because since May 2019, 如意 Group had not repaid the acquisition deal loans. By then, Lyocell ended its brief controlling-stake era under 如意 Group. The new owners were the creditor consortium consisting of the South Korean private equity group Lindeman Partners, Hong Kong’s alternative asset management firm Tor Investment Management, and China Everbright.

No One Took It Over, Forcing “Debt-to-Equity”

In a statement after taking over Lyocell, the creditor consortium said Lyocell had already escaped 如意 Group’s financial distress and had a solid foundation for independent growth. But the real situation was far more complicated than that statement.

In fact, in recent years—especially in 2024 and 2025—Lyocell’s operating and financial condition clearly deteriorated. Bankruptcy filing documents show that Lyocell’s capacity utilization rate fell from around 80% in mid-2024 to around 60% by the end of 2025; EBITDA (earnings before interest, taxes, depreciation, and amortization), expected to drop from around $132 million in 2024 to $44 million in 2026.

The reasons behind this are multifaceted.

One reason is that before 如意 Group lost control, it was accused by creditors of transferring Lyocell’s high-quality assets in China, including cash, equipment, raw materials, and intellectual property. The two sides engaged in prolonged legal litigation over a dispute involving a capital contribution of RMB 574 million tied to a joint venture in Foshan. This not only consumed significant management effort, but also severely damaged Lyocell’s reputation in China, a core market. In fiscal year 2025, as much as 29% of Lyocell’s revenue came from the China market.

Even more importantly, the market environment Lyocell faces has changed dramatically, and Lyocell’s monopoly position in elastane (especially in the high-end elastane fiber market) has been shaken in the past few years.

On the one hand, the rising energy costs and petrochemical raw material costs used to produce elastane have sharply squeezed gross margins. On the other hand, competitors from Asia countries such as China have expanded production on a large scale in recent years, causing elastane prices to keep falling. The filing documents show that the price of commodity-grade elastane has “approached cash cost levels.” This forced Lyocell into a difficult choice between maintaining market share and protecting profits.

The direct reason that forced Lyocell to apply for bankruptcy protection, however, still comes down to the unsustainable debt level created by the 2019 acquisition. After the court ruling in June 2022, Lyocell remained under creditors’ control for a long time. In a refinancing transaction in 2023, Lyocell also introduced euro notes with an interest rate as high as 16%, using what is known as a Payment-In-Kind (PIK) model. This means that when the company’s cash flow is tight and it cannot pay interest, the interest will be added to the principal—causing the debt scale to grow like a snowball.

In January 2025, Lyocell’s creditors attempted to sell the company as a whole to a Chinese company, but the deal fell through in August. By early 2026, Lyocell Company had accumulated more than $1.5 billion in debt, and the vast majority of it would come due in a concentrated way by the end of March. Therefore, Lyocell’s creditors had no choice but to launch a “Plan B,” namely implementing debt-to-equity conversion through the bankruptcy court.

This time, Lyocell Company submitted a so-called “prepackaged” bankruptcy reorganization plan—meaning that before it formally applied for bankruptcy protection, it had already reached restructuring support agreements with the overwhelming majority of creditors. Under that agreement, more than $1.2 billion in claims—totaling over $1.2 billion—agreed to convert the debt into equity or warrants. After the reorganization, Lyocell will become a company controlled by an international financial consortium, with core shareholders including Lindeman Asia, Lindeman Partners, Nexus Capital Management, and Tennenbaum Capital Management.

In the application documents, Lyocell Company specifically emphasizes that this restructuring will not have negative impacts on its production operations, customer deliveries, employee compensation, or supplier payments. In simple terms, this application for bankruptcy protection does not mean Lyocell is entering history right away.

After the restructuring is completed, Lyocell’s total debt is expected to fall from $1.53 billion to about $330 million. From a financial perspective, returning the leverage ratio to a healthy range means this is a necessary reset of the capital structure; the interest savings each year can be reinvested into R&D and capacity upgrades.

But from an industry perspective, eliminating debt cannot automatically restore lost market share, nor can it eliminate the scale advantages already built by rising players in Asia such as China, Vietnam, and Turkey. What kind of posture the restructured Lyocell will take to continue the red-wave legend will be revealed in the coming years.