Renewcell is on a mission to green the fashion industry with Circulose®, its ground-breaking product made from the cotton from worn-out clothes. Nordea drove the company’s successful IPO in December, while also securing comprehensive export and project financing that enables Renewcell to move into large-scale commercialisation. The tailor-made financing, a unique mixture of equity and debt, highlights the critical role of financial actors in financing the ‘Industrial Evolution’ towards circularity and sustainability.
The textile recycling company Renewcell developed Circulose® to revolutionise fashion. “Up until now, the fashion industry has relied on growing more cotton, using more water, spraying more chemicals and pumping more oil to be able to lower prices and sell as much as possible. The modus operandi has been bigger, faster, cheaper and more wasteful,” says Patrik Lundström, CEO of Sweden-based Renewcell.
After years of advanced research and development, Renewcell has emerged as the first known company with the patented technology to produce a dissolving pulp that enables textile production from 100% textile waste. The pulp – with its brand name Circulose® – can replace the use of virgin cotton and petroleum-based polyester, materials with large environmental footprints.
“Renewcell takes clothes that cannot be resold again, preferably cotton clothes, which are then shredded, de-buttoned, de-zipped and de-coloured. Contaminants, like plastic polyester, are taken out. What remains is cellulose, which is dried to produce sheets of pure Circulose®, which is then shipped off to be made into natural textile fibres again,” explains Lundström.
After building its first plant in Kristinehamn, Sweden in 2017 and starting to produce Circulose® at industrial scale, Renewcell partnered with leading global brands such as H&M and Levi’s®. In March 2020, H&M brought a blue dress made with Circulose® to the market and it sold out straight away.
Tailor-made financing enables production ramp-up
Renewcell´s top priority has always been to scale up production, building more and larger plants, in order to make a real change in the industry. A tailor-made financing package facilitated by Nordea will now enable Renewcell to execute its plans to build a 60,000-tonne-capacity textile recycling plant in Sundsvall, Sweden.
“Once we had the technology, organisation and expansion plan in place, we decided to involve banking partners to start evaluating financing options for this project. We wanted to find the optimal solution for Renewcell and not just go for equity,” says Lundström.
Renewcell appointed Nordea to evaluate possible financing options. While equity is usually seen as the sole funding solution for companies like Renewcell, with its full-service offering of financing products and strong sustainable finance franchise, Nordea managed to tailor a financing solution for Renewcell comprised of a mixture of both equity and project financing debt backed by an export credit agency guarantee.
Nordea acted as the global co-ordinator in the IPO, raising SEK 800 million in equity, as well as for the debt facility, raising an additional SEK 520 million with SEK (the state-owned Swedish Export Credit Corporation) as co-lender. The debt facility is backed by an export credit agency guarantee from Finnvera, Finland’s state-owned export credit agency, of up to 85%.
“We came in early 2020 to advise Renewcell on how to structure its financial strategy to be able to take the major step into large-scale commercialisation. Many suggestions were considered and analysed, and we brought in advisors from various parts of Nordea to help secure the structure, both from Corporate and Investment Banking as well as Export & Project Finance,” says Charlotte Frank, Senior Relationship Manager at Nordea.
Coordinating such complex export and project financing usually takes around seven to eight months. In this case, with a non-standard structure in addition, the time frame was only three months – while the IPO ran in parallel.
“The IPO was an instrumental part of the financing structure and vital for the debt financing. The guarantee from Finnvera was also crucial for the debt financing. All parts of the structure were connected, and timing was key to get everything in place at the right time,” adds Charlotte Frank.
Marica Bixo, Director – Export & Project Finance at Nordea, says: “Nordea was able to offer the full scale of financing because of our strong knowledge and experience in both Export Finance as well as in Project Finance. The nature of project finance is often quite complex but was necessary due to the early phase Renewcell is in as a company. Combining our competences in project finance with our good relationships with the relevant export finance agencies resulted in a successful financing for Renewcell within a very short time. This financing is also in line with Nordea’s ambition of supporting sustainable companies.”
“We are still a rather small company with a lean but experienced team, so to raise this kind of money in this short period of time forced us to use our time and resources efficiently. Nordea’s knowledge, expertise and engagement gave us the confidence we needed throughout this project. Raising money for a project of this size can be a challenge, and we succeeded together thanks to great teamwork and efficient problem-solving,” says Renewcell’s Lundström.
Financing the ‘Industrial Evolution’ to circularity and sustainability
The project has strengthened Renewcell´s capital structure by SEK 1.32 billion, with SEK 800 million from the IPO and SEK 520 million from the project financing. On top of this, the European Investment Bank (EIB) has expressed an interest in financing this project, as the initiative directly support EU climate policy goals. This shows how important it is for financial intuitions, such as Nordea, SEK and Finnvera to take the lead and inspire others.
“Our cooperation with Renewcell is a good example of how Nordea supports companies that are advancing solutions to today´s sustainability challenges. We are really happy and proud that we can support Renewcell with our combined expertise within Export & Project financing as well as capital markets and look forward to continuing this journey together,” says Peter Dalmalm, Head of Business Banking Sweden at Nordea.
Renewcell’s Lundström shares that optimism: “We are in the decade of change where companies who make circular systems will be imperative to save the planet. Nordea has been a true partner in supporting us to raise the necessary structured capital, both debt as well as equity, ensuring a strong shareholder base. I am confident that more lenders will now follow Nordea and SEK’s lead in financing the global Industrial Evolution to circularity and sustainability.”
Key enablers – financing beyond equity
- Early and credible growth plan
- Early onboarding and joint vision among partners
- In-depth expertise in industry and sustainable finance
- A financing partner equipped to offer full-service solution
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