Aug. 13 (Bloomberg) -- Escada AG, the German luxury clothing maker whose dresses are worn by Demi Moore and socialite Paris Hilton, filed for bankruptcy protection after failing to win bondholders’ backing for its refinancing.

The Munich Local Court received Escada’s filing, Ingrid Kaps, a spokeswoman for the court, said in a telephone interview today. The court picked Christian Gerloff as preliminary insolvency administrator, Escada said in a statement today.

The filing follows months of negotiations to revamp the company’s finances as debt spiraled and the luxury market contracted. Escada wanted 80 percent of bondholders to exchange old debt for new notes and only received backing from about half of investors. That derailed a plan to obtain a bank loan and raise new capital, forcing the company into insolvency.

Escada follows German companies including 128-year-old retailer Arcandor AG and porcelain maker Rosenthal AG into bankruptcy. More than 2,200 workers are affected by the collapse of what was once the world’s largest maker of women’s fashion.

Founded in 1976 by a Munich couple, Escada makes dresses that can cost more than 10,000 euros ($14,000). The company also produces accessories including snakeskin handbags, eyewear and fragrances. It makes most of its revenue outside Germany, and is popular with affluent female consumers in the U.S. and Russia.

Escada fell as much as 10 cents, or 14 percent, to 62 cents, and has lost 72 percent in the past three days. The shares traded at 65 cents as of 2:26 p.m., giving the company a market value of 20.7 million euros.

The clothier’s biggest investors are Russian millionaire Rustam Aksenenko, who owns 20.9 percent of the stock, as well as German billionaires Wolfgang and Michael Herz, who hold 12.45 percent each. The Herz brothers had backed the capital increase on condition the bond swap went through.

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

Last Updated: August 13, 2009 08:31 EDT