The Escada AG luxury fashion group has agreed to a EUR50m (US$78m) capital increase, and named Bruno Saelzer, the former CEO of Hugo Boss, as its new chief executive.

The German women's wear company said on Tuesday (24 June) that Michael and Wolfgang Herz, the owners of the Tchibo retail chain will acquire a significant minority interest in the company in the first of two cash tranches that will increase its stock by around 10%.

The second tranche will be offered to existing shareholders, and will increase the number of Escada shares from 17.19m to 20.90m.

The move will mean the Herz brothers will now have a stake of almost 30% in the struggling firm.

The Munich-based company also said it had agreed to extend a EUR90m credit facility for one year to the end of 2009.

Markus Schürholz, Escada CFO said the cash will help provide "a stable financial base for the Group's strategic reorientation."

The company last week cut its forecasts for the year, saying both earnings and revenue would be below expectations.

Dr Bruno Sälzer, who takes up his post on 1 July and replaces current CEO Jean Marc-Loubier, said: "Few brands in the luxury fashion industry combine such worldwide renown with such great untapped potential.

"Escada has everything it needs to grow profitable in the luxury goods market…but must definitely act promptly to catch back up with its competitors."