Troubled fashion house Escada says
that it is close to completing its restructuring plans to set the firm back on a path to financial stability. On Monday the company will launch a $279 million, bond exchange program. Under the program, bondholders are being offered a cash incentive to turn in their bonds for new ones if they act by July 14th.
The bond restructuring is key to Escada's rescue plan, which also calls for a capital increase of at least 29 million euro, or about $40.7 million, at current exchange rates.
Escada said it has received commitments from board members and key shareholders, such as the Herz family, which holds a 24.9 percent stake, Spanish investor Bestinver, holding a 10 percent stake, plus a new investor.
To cover its short-term liquidity as well cash requirements during the restructuring period and beyond, Escada said it has received 15.5 million euros, or $21.7 million, from the sale of its fragrance and cosmetics license agreement. Escada expects a further payment of a further 1.5 million euros, or $2.1 million, in the next months.
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Moreover, Escada said HypoVereinsbank has agreed to maintain the existing bank guarantee line of 13 million euros, or $18.1 million, providing the bond exchange and capital increase are successfully completed. Escada added that the German tax authorities have agreed not to tax any recapitalization gains arising from the restructuring plan.
The bond exchange program runs through July 31st and it's too early to tell whether the bondholders will go along with the plan. But if they don't it's unlikely Escada can avoid bankruptcy.
