Shoe & Shirt, the Austrian group that owns the Richter, Jela and Siesta brands of children’s footwear, has obtained the rough equivalent of Chapter 11 bankruptcy protection for its production and sourcing unit, Shoe & Shirt Production. The rest of the business, including the group’s own factories in Hungary and Slovakia, is not affected by the insolvency proceedings, which are intended to clean up the finances after the group’s unfortunate investment in GBB, a French children’s shoe firm that was taken over a few months ago by a French socks company, Kindy, in a liquidation of its assets.

The bankruptcy court in Linz is set to decide on Aug. 22 what the creditors will get, and the process should be completed by mid-September. Banks and other creditors, including suppliers in the Far East, have already accepted in principle a settlement of the debts, which reportedly total €17.8 million against assets of €11.3 million. According to preliminary figures quoted by Shoez, the company had a loss of €1.9 million on sales of €40 million in the year ended last Apr. 30.

Shoe & Shirt Production’s creditors have apparently shown understanding for the fact that the group was the victim of the fraudulent practices that led to GBB’s bankruptcy and subsequent liquidation. GBB’s bankruptcy resulted in several million euros of losses for Shoe & Shirt Production due to the writeoff of bad debt and to delayed payments, as the company handled since last November all purchase orders for materials and products required for GBB’s Spring/Summer 2006 collection.

The group’s production subsidiaries in Hungary and Slovakia will give up some of their own liabilities toward Shoe & Shirt Production as part of the new proceedings. About 50 employees will be laid off in a reorganization of the operations, including the outsourcing of prototype development and warehousing. However the group has assured its customers that they have sufficient reserves to continue to operate normally, and that there will be no delays in deliveries of the group’s remaining Fall/Winter 2006/07 and Spring/Summer 2007 collections.