(Adds details of funding and relaunch plan)
MILAN, April 10 (Reuters) - Two private equity funds that have agreed to take over loss-making Italian clothing company Stefanel plan to relaunch the brand and sell it within five years, a source at one of the funds said.
Stefanel reached an agreement at the end of March to sell a 75 percent stake to Oxy Capital and Attestor Capital and immediately received 10 million euros ($10.6 mln) in emergency funding from them to avoid bankruptcy.
The new owners seek to reposition the Italian group, aiming at women between the ages of 35 and 50 rather than younger customers, in a segment of the market just above Benetton and Zara, the source at Oxy Capital, who did not wish to be identified, said.
"One of Stefanel's problems was raising its target too much, pushing towards luxury, without doing the same thing on the quality offered, and thus losing customers," the source said.
Oxy and Attestor also aim to cut the number of Stefanel stores and sell more through third-party outlets such as department stores.
The fashion group accumulated over 170 million euros in losses over the past decade as it faced fierce competition from high-street brands like H&M and Zara.
Oxy and Attestor expect to complete the purchase by the summer, after receiving the green light from Italy's market watchdog and a Treviso-based court that handled the bankruptcy case, the source said.
They will appoint a new CEO in the next three to six months but have decided against delisting Stefanel as that was considered too costly.
Stefanel is set to receive another 15 million euros in new funds from creditor banks and from Oxy Capital and Attestor Capital. Giuseppe Stefanel, former owner and chairman, might contribute between 1.25 million and 2.5 million euros of that but it has not yet been decided, the source said.
Stefanel's new business model could entail shifting production from China to Italy, Turkey and Romania, the source said. ($1 = 0.9433 euros) (Reporting by Claudia Cristoferi, writing by Giulia Segreti; Editing by Susan Fenton)