July 3 (Bloomberg) -- Escada AG Chief Executive Officer Bruno Saelzer said he’s optimistic investors will back a refinancing plan and avert insolvency at the German dressmaker whose celebrity clients include actress Katie Holmes.

Saelzer said he gets about 15 calls from bondholders a day, and feedback so far indicates they support his plan, he said in an interview in Berlin. Escada wants investors to exchange 200 million euros ($281 million) in seven-year bonds due 2012 by the end of July to shore up finances and win support from banks.

“We’re not building the last part of our roof here, this is the cornerstone,” Saelzer said. “I don’t have a sense of the quota of acceptance yet. I’m generally optimistic.”

Escada shares dropped 19 cents, or 7.8 percent, to 2.25 euros, giving the Munich-based company a market value of 47 million euros.

Escada hired Saelzer, a former CEO of Hugo Boss AG, last year to turn around what was once the world’s largest maker of women’s fashion, before failed collections and management wrangles brought the Munich-based luxury dressmaker close to collapse. Saelzer is pushing Escada’s lower-priced casual line, overhauling purchasing and closing some operations, in what he said is a “start-up” where no position remains unaffected.

At least 80 percent of bondholders need to accept the new terms. Each 1,000 euros in old debt will be replaced by one bond worth 250 euros maturing in 2014 and a second bond worth 125 euros due 2016, the company said June 26. A 25-euro cash bonus for signing up until July 14 raises the nominal value of the new offer to 400 euros per 1,000 euros held.

Billionaire Shareholders

Backing from bondholders will guarantee Escada support from UniCredit Spa’s German unit for a 13 million-euro loan, and trigger a capital increase of at least 29 million euros backed by the company’s main shareholders. Escada investors include German billionaire siblings Wolfgang and Michael Herz, as well as a subsidiary of Spanish builder Acciona SA.

Moody’s Investors Service cut its rating on Escada to Ca from Caa3, saying “the debt exchange offer represents a distressed exchange that will be considered as a default under the rating agency definition when the transaction closes.”

Saelzer said he wants to avoid insolvency out of concern for the luxury brand’s image. Escada, whose customers include actress Demi Moore and socialite Paris Hilton, makes dresses that can cost more than 10,000 euros, as well as snakeskin handbags, eyewear and fragrances for women. Saelzer said he’s shuttering a development site in Italy for accessories with about 50 employees and is outsourcing the work to cut costs.

Movie Dress

Holmes, the wife of actor Tom Cruise, wore a low-cut black Escada dress to the European premiere of the movie “Valkyrie,” in which Cruise plays a resistance fighter in Nazi Germany.

Escada’s goal is to lift the proportion of sales generated from its more casual Escada Sport unit to 50 percent of the total in five years, from about half that amount now. About half of Escada’s business is generated in its own shop network, while the other 50 percent is evenly distributed between franchise partners and wholesalers such as Saks Inc. or Neiman Marcus Inc.

Saelzer estimates the number of Escada’s own stores will likely remain unchanged at about 175 globally in the future, while selling points at retailers will increase. The U.S. is Escada’s biggest market, generating 24 percent of sales. Escada had revenue of 582 million euros last year.

The executive will meet investors in Munich and Hamburg this week to drum up support for the bond swap. He declined to say if he would stay on the job should refinancing fail and Escada enter insolvency proceedings.

“At the end of the day customers buy exciting fashion and not my restructuring,” Saelzer said. “Everything’s in place now, and this is the end game.”

To contact the reporter on this story: Claudia Rach in Berlin at crach1@bloomberg.net

Last Updated: July 3, 2009 14:47 EDT