UPDATE 2-Escada future uncertain as insolvency nears

* Supervisory board meets on Wednesday

* Escada shares fall 55 pct

(Recasts throughout, adds background)

By Eva Kuehnen and Astrid Wendtland

FRANKFURT/PARIS, Aug 12 (Reuters) - The future of Escada (ESCG.DE) looked uncertain on Wednesday after bondholders refused to back a make-or-break debt restructuring deal, pushing the German fashion house to file for insolvency this week.

Founded in Munich in 1976, Escada was one of the few German fashion houses to have expanded abroad successfully but is the latest high-end clothing brand to succumb to a toxic cocktail of internal problems and the global consumer spending collapse.

Cash-strapped couture house Christian Lacroix is trying to find a buyer while IT Holding (ITH.MI), owner of Milan fashion brand Gianfranco Ferre, is looking for new investors after being placed into administration this year.

Escada, known for its elegant evening gowns worn by Hollywood stars such as Hilary Swank and Katie Holmes, had to admit defeat late on Tuesday after it failed to gather sufficient support for a bond exchange.

The debt swap had been the crucial precondition for a broader restructuring package that included a capital increase as well as further credit lines.

Chief Executive Bruno Saelzer said the outcome was regrettable because shareholders, banks and employees had made the necessary contributions to the company's financial recovery and Escada's repositioning had already shown positive results.

"Therefore the board of management plans to present its ongoing operational restructuring plan to the preliminary insolvency administrator," the 52-year-old fashion veteran said.

The company's supervisory board was due to meet on Wednesday to discuss its next steps.

Escada shares plunged as much as 56 percent and were down 52.3 percent at 0.42 euros by 1008 GMT, valuing the company at around 23 million euros ($32.5 million), an eighth of its debt level. The stock hit an all-time high in March 2001 at 43.54 euros.

"With yesterday's development, betting on a last-minute rescue at Escada seems no longer a viable option," Equinet analyst Ingbert Faust wrote in a note to clients.

IRISH THOROUGHBRED

Bruno Saelzer took the reins at Escada in July last year and many pinned their hopes on the man who had already turned around the womenswear line of German premium fashion house Hugo Boss (BOSG_p.DE) as CEO from 2002 to 2008.

At Escada, Saelzer, who still wears Hugo Boss from tip to toe, trimmed costs and sold subsidiaries and assets that did not fit into Escada's core business. Escada still posted a loss of 92 million euros for the six months to the end of April.

Sales of Escada branded items dipped 18 percent and net debt rose to 187.6 million euros from 177.1 million as of Oct. 31.

Escada, which was named after an Irish thoroughbred, makes about 88 percent of its sales outside of Germany and has been suffering of late from a decline in demand in Russia, one of its key markets along with the United States.

Escada owns 182 shops and 225 franchise shops or corners in more than 60 countries. The couture business has over the years diversified into accessories, sportswear, fragrances as well as eyewear. ($1=.7079 Euro) (Editing by Simon Jessop)