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‘Unprofitable’ Escada America Files for Bankruptcy

Escada America filed for bankruptcy Tuesday.

The German brand known for high-end women’s wear had long been run in an “unprofitable manner,” Escada director of finance Kevin Walsh wrote in papers filed with a Los Angeles federal bankruptcy court. Prior management recklessly expanded into untested markets, squandered money on expensive leases and executive compensation, and didn’t pivot to serve a new consumer, he added.

By late 2019, Escada sold off 29 subsidiaries in 22 countries to current owner Beverly Hills-based Regent, Walsh said. Covid-19 thwarted the private equity firm’s turnaround plan for Escada, and while some landlords agreed to new lease terms, other “obstinate” property operators resisted, forcing the employer of 58 to file a Chapter 11 petition, he added.

This isn’t Escada’s first brush with bankruptcy. Megha Mittal, the daughter-in-law of Indian steel magnate Lakshmi Mittal, purchased the fashion house out of bankruptcy through Mittal Family Trusts just months after an August 2009 filing.

The German firm subsequently moved most of its assets to a U.S. holding company, and established the U.K., where some Mittal family members live, as its European base. The German arm filed a second insolvency in September before Regent stepped in to purchase the firm.

Escada’s assets and liabilities both fall in the $1 million to $10 million range, with landlords dominating the list of the company’s 20 biggest unsecured claims, according to court filings, which name more than 150 total creditors.

Three secured creditors include Eden Roc International and Mega International, and Escada Sourcing and Production, which owns the brand’s inventory through a consignment model.