BERLIN — To ensure its survival, the Escada Group is launching a broad financial restructuring and recapitalization package to raise 30 million euros, or $39 million at current exchange, needed to keep the company liquid this year, as well as reduce debt and secure medium- to long-term financing.
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Late Thursday, the embattled German fashion house released a four-part financial restructuring plan, details of which are still being fine-tuned.
Subject to approval at the firm’s annual shareholders’ meeting Tuesday, the plan calls for a 30 million euro capital increase in July. Escada’s largest shareholders, Wolfgang and Michael Herz who, after last July’s 50 million euro, or $65 million, capital increase hold a 24.9 percent stake, are said to be willing to invest up to 20 million euros, or $26 million, more. This, however, is dependent on the German financial supervisory authority BaFin allowing the Herz brothers to refrain from issuing a mandatory takeover offer for the other shareholders.
The second part of the plan foresees converting a 200 million euro, or $260 million, bond that’s due for repayment in 2012 into a new bond. In accepting the deal, creditors would agree to take a cut in bond repayment and to extend its term. Escada said conditions of the exchange offer are being worked out.
The company said it is also actively negotiating with banks on existing and new credit lines, and plans to complete the financial restructuring in July.