The Mittal family trust is buying Escada's main business, brand rights, production facilities and distribution network, the Munich-based company said late yesterday, without disclosing the purchase price. The sale will probably be complete by the end of this year, according to Escada spokesman Frank Elsner.

Megha Mittal, daughter of an Indian textile investor and a graduate of the University of Pennsylvania's Wharton business school, met Escada workers in Munich today. She said Chief Executive Officer Bruno Saelzer would keep his job and staff wouldn’t be cut, according to Elsner.

"It may well be a vanity project, but I'm sure at heart she would want to make it a success," said Asish Bhattacharyya, a finance professor at the Indian Institute of Management in Kolkata. "It's quite normal among Indian business families to open or buy a new business for family members."

Lakshmi Mittal, who now lives in one of London's most expensive homes, turned a family-owned Indonesian steel mill into the world's biggest steelmaker over 30 years through acquisitions. He ranks eighth on this year's Forbes list of billionaires, with an estimated fortune of $19.3 billion. Megha Mittal is married to his son Aditya Mittal, chief financial officer of the family's main business, Luxembourg- based ArcelorMittal.

Escada, which filed for insolvency last month, has until December to find a buyer. Reports suggest up to 12 buyers have expressed an interest, including German lawyer Nickolaus Becker.

UK deliveries of the Escada collections continue as normal. There are no plans to cut any jobs at head office at present. Escada filed for bankruptcy protection after sales slowed in the luxury market and its debts spiralled out of control. The company attempted a refinancing deal but failed to get the necessary support from its bond holders.

The Munich-based luxury label, famous for women's fashion and accessories, was expected to make the filing this week after it failed to get the necessary support for a bond swap. Escada, once one of the biggest fashion brands in the world, has seen its sales and earnings decline in recent years.

The company had hoped to reduce debt by offering bondholders a new bond in exchange, made up of two parts plus a cash component. Taken together, the new bond would have carried a total nominal value of €400 ($568) in exchange for every €1,000 in nominal value of the old bond. Escada said a number of restructuring measures, including a plan to raise €30 million through its bigger investors and a credit extension of more than €13 million, had been contingent on the bond swap, but it didn't get enough support from the bondholders. The minimum acceptance ratio was 80% of bondholders.

A successful swap would have also given the company some immediate liquidity to help it eliminate some of its debt. The company said earlier this week that the situation was "regrettable," but that it still hoped for a turnaround in its finances and business.

Saelzer reportedly told German newspaper Welt Am Sonntag that talks had already taken place with insolvency experts. He said he hoped it would not come to that, but that the group was in a difficult situation. He said it had enough liquidity to last until August but not beyond.

Escada has put a debt restructuring plan to its creditors which must be approved by 80% of them by July 31. If that fails, Saelzer said it would be "inevitable" that Escada would cease trading because "98 out of the 99 possible measures" to save the company had already been taken.

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.

Stricken luxury fashion house Escada needs the support of both its bondholders and owners to survive the coming weeks, a source with knowledge of the situation told Reuters. However, the source said that rescue of the company, whose gowns are worn by Hollywood stars such as Katie Holmes, may take longer than initially planned despite earlier warnings that it may go bust as soon as next month.

Escada has been struggling with falling sales as recession compounds difficulties it is having selling its clothes, which some have labelled old-fashioned. To survive, Escada needs to raise fresh capital, cut debt and secure new loans, but it looks now like all this could drag on until the beginning of August, the source said.