Escada out of fashion, declares bankruptcy

German fashion designer Escada AG's 2,300 worldwide employees -- not to mention the good looks of the celebrities who wear its garments -- were placed in jeopardy today as the clothing maker filed for bankruptcy in Munich Local Court. The company has undergone months of financial negotiations as its market dwindled and its debt soared, culminating in a bid this week to restructure its bonds. Escada needed 80 percent of its bondholders to exchange old notes for new, but failed; only about half would exchange their debt; and hopes to obtain a new bank loan were dependent on a favorable bond-exchange outcome.

Escada's survival will depend on the form its bankruptcy will take. A spokesman told the AFP that "management and employees hope the group will continue to exist," though this is only the latest in a string of German companies, including 128-year-old retailer Arcandor AG, to file bankruptcy. Escada has only been around since 1976, though it has risen quickly to prominence thanks to celebrities like Demi Moore, Hilary Swank, and Katie Holmes who covet its wears. A single gown can cost $14,000.