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FRANKFURT, Aug 11 (Reuters) - German luxury fashion house Escada (ESCG.DE) failed to get sufficient backing for its crucial bond exchange on Tuesday and said it would file for insolvency later this week.
Escada failed to reach an approval rate of at least 80 percent for its bond swap. Only 46 percent of the bondholders agreed to forego more than half of their investments.
"As previously communicated ... the board of management intends to file for the opening of insolvency proceedings due to imminent illiquidity of Escada AG this week," Escada said in a statement late on Tuesday.
It also canceled a planned capital increase for which a successful bond exchange had been the precondition.
The company said on Monday it would file for insolvency if it failed to gather enough support. Its supervisory board is due to meet on Wednesday to discuss the next steps.
Escada shares dropped by about a third on Tuesday and closed at 1.55 euros. [ID:nLB693521]
ECCENTRIC DESIGNS
Escada rose to fame in the late 1980s and early 1990s thanks to the colourful, eccentric designs of the late Margaretha Ley, who founded the company with husband Wolfgang in 1976.
In recent years, Escada struggled to sell its clothes, which some have labeled old fashioned. The recession has compounded its difficulties.
The first warning signs came in March when Escada posted a hefty 2007/08 loss, warning that it could run into difficulties if it failed to raise fresh cash in the next few months. [ID:nLH443405]
Escada launched a refinancing plan in April, which hinged on the bond swap.
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FRANKFURT/PARIS, Aug 12 (Reuters) - The future of Escada (ESCG.DE) looked uncertain on Wednesday after bondholders refused to back a make-or-break debt restructuring deal, pushing the German fashion house to file for insolvency this week.
Founded in Munich in 1976, Escada was one of the few German fashion houses to have expanded abroad successfully but is the latest high-end clothing brand to succumb to a toxic cocktail of internal problems and the global consumer spending collapse.
Cash-strapped couture house Christian Lacroix is trying to find a buyer while IT Holding (ITH.MI), owner of Milan fashion brand Gianfranco Ferre, is looking for new investors after being placed into administration this year.
Escada, known for its elegant evening gowns worn by Hollywood stars such as Hilary Swank and Katie Holmes, had to admit defeat late on Tuesday after it failed to gather sufficient support for a bond exchange.
The debt swap had been the crucial precondition for a broader restructuring package that included a capital increase as well as further credit lines.
Chief Executive Bruno Saelzer said the outcome was regrettable because shareholders, banks and employees had made the necessary contributions to the company's financial recovery and Escada's repositioning had already shown positive results.
"Therefore the board of management plans to present its ongoing operational restructuring plan to the preliminary insolvency administrator," the 52-year-old fashion veteran said.
The company's supervisory board was due to meet on Wednesday to discuss its next steps.
Escada shares plunged as much as 56 percent and were down 52.3 percent at 0.42 euros by 1008 GMT, valuing the company at around 23 million euros ($32.5 million), an eighth of its debt level. The stock hit an all-time high in March 2001 at 43.54 euros.
"With yesterday's development, betting on a last-minute rescue at Escada seems no longer a viable option," Equinet analyst Ingbert Faust wrote in a note to clients.
soruce: reuters.com
Escada failed to reach an approval rate of at least 80 percent for its bond swap. Only 46 percent of the bondholders agreed to forego more than half of their investments.
"As previously communicated ... the board of management intends to file for the opening of insolvency proceedings due to imminent illiquidity of Escada AG this week," Escada said in a statement late on Tuesday.
It also canceled a planned capital increase for which a successful bond exchange had been the precondition.
The company said on Monday it would file for insolvency if it failed to gather enough support. Its supervisory board is due to meet on Wednesday to discuss the next steps.
Escada shares dropped by about a third on Tuesday and closed at 1.55 euros. [ID:nLB693521]
ECCENTRIC DESIGNS
Escada rose to fame in the late 1980s and early 1990s thanks to the colourful, eccentric designs of the late Margaretha Ley, who founded the company with husband Wolfgang in 1976.
In recent years, Escada struggled to sell its clothes, which some have labeled old fashioned. The recession has compounded its difficulties.
The first warning signs came in March when Escada posted a hefty 2007/08 loss, warning that it could run into difficulties if it failed to raise fresh cash in the next few months. [ID:nLH443405]
Escada launched a refinancing plan in April, which hinged on the bond swap.
-------------------------------------------------------------------------
FRANKFURT/PARIS, Aug 12 (Reuters) - The future of Escada (ESCG.DE) looked uncertain on Wednesday after bondholders refused to back a make-or-break debt restructuring deal, pushing the German fashion house to file for insolvency this week.
Founded in Munich in 1976, Escada was one of the few German fashion houses to have expanded abroad successfully but is the latest high-end clothing brand to succumb to a toxic cocktail of internal problems and the global consumer spending collapse.
Cash-strapped couture house Christian Lacroix is trying to find a buyer while IT Holding (ITH.MI), owner of Milan fashion brand Gianfranco Ferre, is looking for new investors after being placed into administration this year.
Escada, known for its elegant evening gowns worn by Hollywood stars such as Hilary Swank and Katie Holmes, had to admit defeat late on Tuesday after it failed to gather sufficient support for a bond exchange.
The debt swap had been the crucial precondition for a broader restructuring package that included a capital increase as well as further credit lines.
Chief Executive Bruno Saelzer said the outcome was regrettable because shareholders, banks and employees had made the necessary contributions to the company's financial recovery and Escada's repositioning had already shown positive results.
"Therefore the board of management plans to present its ongoing operational restructuring plan to the preliminary insolvency administrator," the 52-year-old fashion veteran said.
The company's supervisory board was due to meet on Wednesday to discuss its next steps.
Escada shares plunged as much as 56 percent and were down 52.3 percent at 0.42 euros by 1008 GMT, valuing the company at around 23 million euros ($32.5 million), an eighth of its debt level. The stock hit an all-time high in March 2001 at 43.54 euros.
"With yesterday's development, betting on a last-minute rescue at Escada seems no longer a viable option," Equinet analyst Ingbert Faust wrote in a note to clients.
soruce: reuters.com
