Relevant Document:
Insolvency Filing
A block of German fashion retailer Escada’s €200 million defaulted bonds traded at about 4 cents in the last week of November, sources told Reorg. At the end of October, a buyer was interested in up to €10 million of the notes at 3 cents. According to sources, a seller was trying to offload a larger piece of the bonds in early December. The bond was issued in 2005 and paid a coupon of 7.5%.
Escada filed for insolvency in 2009 and Christian Gerloff was appointed as administrator. He told investors recently that the final distribution of the company’s bonds will be split into two installments for tax reasons, sources said.
Bondholders will receive about 2% recovery of the bonds’ nominal amount via the most recent distribution in November and a further 3.4% in mid-2022, sources told Reorg. The total recovery of the bond is estimated to be 20%-25% based on the insolvency administrator’s initial reports, sources said. In 2011, the insolvency administrator made a
distribution of about €37 million, which represented about 16% the collected claims.
The split in two installments of the final distribution has prompted some investors to sell their holdings, sources said.
The Mittal family
bought Escada out of insolvency in 2009 after a rescue plan failed to find sufficient backing among its bondholders. The plan had
envisaged that noteholders would sacrifice more than half their investment to help the company obtain a €200 million bank loan, according to
press reports.
In 2020, Escada SE
filed for insolvency, only a year after the company was
sold to U.S. private equity group Regent LP for about €60 million, according to
press reports. The filing was due to continuous falling sales which were exacerbated by the Covid-19 pandemic. As part of the insolvency proceedings, Regent
bought parts of the company back.
Gerloff is acting as the insolvency administrator with Allen & Overy
advising in connection with negotiations about the transfer of some of Escada SE’s assets to Regent.
A number of other activities were discontinued with effect as of Feb. 28. This applied to the majority of Escada stores in Germany.
--Aurelia Seidlhofer, Luca Rossi