BERLIN — Escada AG officially filed for insolvency at the Munich district court Thursday. The German fashion house said it would make the move after a bond exchange offer failed to gain sufficient support this week, undermining its financial rescue plan.
German law does not have an equivalent of Chapter 11, and planned insolvency is the closest procedure to bankruptcy. The court has appointed Christian Gerloff as interim insolvency administrator.
Escada employs 2,300 people, 600 of them in Germany. The fashion house noted the company’s subsidiaries both in Germany and abroad are not affected by the insolvency proceedings at this time. However, in individual cases where subsidiaries are guaranteeing the fulfillment of the 2005/2012 bond, which applies to the U.S., U.K. and Escada Asia Ltd., Escada said “restructuring and/or insolvency proceedings for these subsidiaries might be considered under the application of national laws.”
Escada’s share price has been in free-fall this week, losing more than 70 percent of its value in the last three days. Shares of Escada Thursday declined 0.02 euros, or 2.9 percent, to close at 0.68 euros, or 96 cents at current exchange.