Fashion failure
August 13, 2009
A spokeswoman for the municipal court in the southern German city of Munich told the dpa news agency that Escada had filed for bankruptcy on Thursday.
Insolvency became inevitable for the luxury women's fashion label after a rescue plan failed to find sufficient backing among investors.
The emergency plan had called on bondholders to sacrifice more than half their investment to help the company obtain a 200-million-euro ($282 million) bank loan.
By the time the approval deadline expired on Tuesday afternoon, only 46 percent of bondholders had agreed to the deal - far short of the 80 percent threshold required to secure Escada's short-term survival.
Escada managers informed the company's 2,300 employees of the failure on Wednesday. Supervisory board chairman Reinhard Poellath told the Handelsblatt newspaper that the company planned to file for court protection in Munich on Thursday.
From top to flop
Escada was founded by Margaretha and Wolfgang Ley in Munich in 1978. It became a publicly-traded company in 1986, and by 1990 it had grown into one of the world's best-known fashion brands.
The label was popular among Hollywood celebrities such as Demi Moore, who often wore Escada gowns worth up to 7,000 euros ($10,000) to red-carpet events.
Recent years, however, saw the company struggle with internal management disputes, design flops, and a shrinking market for luxury fashion items. Here are some key events marking the fashion group's demise:
May 2007:
Escada chief Frank Rheinboldt loses a months-long power struggle against a major shareholder, Rustam Aksenenko from Russia, who wants the company to fast-track modernization plans. Rheinboldt is replaced by Frenchman Jean-Marc Loubier.
June 2007:
Loubier unveils plans to close unprofitable outlets, expand Escada's accessories range, and focus the firm's strategy more tightly on the key Chinese, US and German markets.
September 2007:
Escada's latest collection proves to be a flop. Management lowers its profit forecast.
February 2008:
The lack of interest surrounding Escada's autumn-winter collection sees company turnover plummet and losses amass.
April 2008:
The unfolding financial crisis prompts private equity firm Apax Partners to withdraw its offer to buy into Escada. The fashion group's struggling share price is boosted by rumors that another management changeover could be in the works.
June 2008:
The owners of Germany's Tchibo coffee retail chain, Wolfgang and Michael Herz, invest heavily in Escada and install a new management team. Bruno Saelzer, the former chief of Hugo Boss, becomes Escada's third CEO in two and half years.
March 2009:
Following a 70-million-euro loss for the 2007/2008 financial year, Escada reports further losses for the first quarter. Chief financial officer Markus Schuerholz says the company is in danger of insolvency.
May 2009:
Escada abandons its medium-price segment brands: Laurel, cavita und apriori.
June 2009:
Escada unveils an emergency stock swap plan intended to save the company from bankruptcy. Management appeals to bondholders to sacrifice more than half of their investments to provide the company with 200-million-euro capital injection.
July 2009:
Escada improves the conditions of its unpopular bond swap offer and extends the deadline for investor approval.
August 2009:
Escada's share price plummets as the market gives up on the fashion group's survival.
sje/dpa/Reuters/AP
Editor: Nancy Isenson