German company Escada is the first fashion company to fall victim to the declining economy this fall.
FRANKFURT -- German fashion company Escada AG filed for bankruptcy after being unable to obtain sufficient financing, a Munich district court said Thursday.
The Munich-based luxury label, famous for women's fashion and accessories, was expected to make the filing this week after it failed to get the necessary support for a bond swap.
Escada, once one of the biggest fashion brands in the world, has seen its sales and earnings decline in recent years.
The company had hoped to reduce debt by offering bondholders a new bond in exchange, made up of two parts plus a cash component. Taken together, the new bond would have carried a total nominal value of €400 ($568) in exchange for every €1,000 in nominal value of the old bond.
Escada said a number of restructuring measures, including a plan to raise €30 million through its bigger investors and a credit extension of more than €13 million, had been contingent on the bond swap, but it didn't get enough support from the bondholders. The minimum acceptance ratio was 80% of bondholders.
A successful swap would have also given the company some immediate liquidity to help it eliminate some of its debt.
The company said earlier this week that the situation was "regrettable," but that it still hoped for a turnaround in its finances and business.
In the fiscal year 2008, the company posted a net loss of €70 million and sales of €528 million. In the first half of the fiscal year ending in April, it lost €92 million.
Escada operates 182 of its own shops and 225 franchise shops in more than 60 countries, employing about 2,300 people.
Shares of Escada fell 6% to 66 European shares in afternoon trading in Frankfurt.—Dow Jones Newswires contributed to this article.
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