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Italy IT Holding's unit to file for administration

IT Holding, owner of the Gianfranco Ferre brand, said Ittierre SpA would file for extraordinary administration after failing to find adequate funding.

The move will allow Ittierre to be restructured and continue in business, IT Holding said in a statement on Monday.

The company has been seeking a partner for months and like other luxury goods companies, has felt the impact of the financial crisis on high-end retail consumption.

It had a nine-month net loss of 10.1 million euros ($13.11 million), against a profit of 6.6 million euros a year earlier and expects an 8 percent drop in 2008 sales.

Under Italian law, a commissioner will now be appointed by the government to overlook the administration process.

Milan's bourse suspended the shares indefinitely.

IT Holding said its board would meet again "soon" to consider its next steps, should the commissioner not extend the extraordinary administration to the parent company.

Moody's downgraded IT Holding's "probability of default rating".

IT Holding said last week it had received a proposal from a foreign fund which included plans for a capital increase and the repurchase of a bond.

Two sources close to the matter told Reuters last week that IT Holding had approached private equity fund Kingsbridge after the deadline for exclusive talks with China's Mensun passed on Dec. 31.

Another source said IT Holding was discussing a 100 million euro investment with Kingsbridge. Kingsbridge has not commented.

Ittierre distributes products for brands like VJC Versace and Just Cavalli -- of designer Roberto Cavalli, who himself is in talks with Clessidra about the private equity fund taking a stake in his fashion house.

Ittierre accounted for 63 percent of IT Holding's group revenues of 468 million euros ($604.1 million) at the end of September.

IT Holding, which had net debt of 295.4 million euros at the end of September, said last week it was in talks with licensors over delays in paying royalties.

"(Ittiere's) decision ... is the likely consequence of a financial situation that has deteriorated to the point that the company is no longer in the condition to even run daily operations," UniCredit said in a note.

IT Holding has a market cap of about 43 million euros.

The company's 9-7/8 percent senior notes due 2012 become immediately redeemable if a subsidiary enters extraordinary administration.

"We ... believe the bankruptcy procedure, whatever the outcome (asset liquidation or debt consolidation and restructuring) will leave negligible value for existing shareholders, if any," UniCredit said.