Patisserie Valerie owner calls in administrators after bank talks fail

The owner of the Patisserie Valerie chain said it was unable to renew its bank facilities "as a direct result of the significant fraud" it had revealed in recent weeks, where "extensive" misstatement had been made to its accounts, with "very significant" manipulation of the balance sheet and profit and loss accounts, with thousands of false entries into the company's ledgers.

Last Wednesday it revealed that discussions were underway to extend the standstill of its bank facilities beyond the 18 January deadline.

But as a result of the failure of these talks, Patisserie Holdings said the business does not have sufficient funding to meet its liabilities as they fall due, so directors have appointed partners at KPMG as administrators to the company and its subsidiaries.

KMPG said it was closing 70 outlets but was looking for a buyer for the remaining 21 cafes.

Chairman Luke Johnson, the AIM-listed firm’s biggest shareholder with a 37% stake, was said to have personally put up an unsecured, interest-free loan to help ensure that wages for the current month are paid to all staff working in the ongoing business. "This loan will also assist the administrators in trading as many profitable stores as possible while a sale process is undertaken," the company said.

In October, the company announced it had found a £40m black hole in its accounts and that it faced collapse, with Johnson stepping in to keep the company going by providing loans totalling around £20m. Finance director Chris March was then arrested before being released on bail without charge.

The following month, 99% of shareholders backed a £15m rescue deal where new shares were issued to private investors in a deeply discounted rights issue.

But despite backing the plan, many shareholders were angry at Johnson that new investors will be able to buy into the business at such a discount.

Auditor Grant Thornton is being investigated by the Financial Reporting Council over its role overseeing the accounts.