Escada - capital raising

Luxury Goods

Escada, the German luxury womenswear group, has launched plans to raise €29 million (A$29.7m) in a rights issue in a bid to restructure its debt and stave off insolvency.

The capital raising is conditional on 80 per cent of its bondholders, which are due to be repaid in 2012, agreeing to a restructuring of their bonds. Escada said it would offer shareholders one new bond for every two they currently own, representing 40% of the value of the old bond, in a bid to reduce the debt in the company. The capital raising is conditional on 80% of Escada shareholders agreeing to the restructuring of their bonds and just 37% of shareholders are thought to have agreed to the restructuring so far.

Preliminary figures in May showed half-year sales at Escada and its discontinued Primera operations were 16 per cent below the same period the year before, and were at the low end of expectations. The bond restructuring plan would halve Escada’s bond debt as well as push out the maturity of its debts.

A spokesman for Escada said that if a deal was not reached the company would file for insolvency because there was no alternative plan. The company believes it only has enough liquidity for the month of August. Escada has also been in discussions with its banks in a bid to uphold existing, and grant new, credit lines.

Escada chief executive Bruno Saelzer, told a German newspaper earlier this month that Escada was in talks with insolvency experts and if the restructuring fails it was “inevitable” that Escada would cease trading.