Patisserie Valerie enters administration after bank talks fail
Patisserie Valerie collapsed into administration this evening after discussions with its lenders fell apart following the shock revelation of “significant fraud” at the high street cafe chain.
Chairman Luke Johnson had been scrambling to come to an agreement with creditors to secure a cash lifeline after posting an update to the market last week admitting that its balance sheet had been significantly manipulated.
The high-profile entrepreneur, who made his name turning around under-performing businesses such as Pizza Express, had pumped £10m of his own money into the business in a bid to keep it afloat following the discovery of a £40m hole in the bakery’s finances last year.
Johnson, who also runs Risk Capital Partners and is on the board of Elegant Hotels and Brighton Pier, came under fire for having too many jobs in the wake of the discovery and stood down from a number of director positions.
Despite his efforts to save the troubled chain investors slammed Johnson and other non-executive directors at a crunch shareholder meeting in November for being “asleep at the wheel”.
Nick Burchett, UK equities manager at major investor Cavendish Asset Managers, said Johnson’s reputation would be “dented” by Patisserie Valerie’s failure.
“People will remember him as the person that built Patisserie Valerie up, and it failed. It fell off a cliff very quickly and hit the ground below,” he told City A.M.
Johnson has offered a £3m loan to help ensure that staff are paid their January wages and to allow as many profitable stores as possible to continue trading during the sales process.
In a statement to the market today the company said: “Patisserie Holdings announces today that, as a direct result of the significant fraud referred to in previous announcements, it has been unable to renew its bank facilities, and therefore regrettably the business does not have sufficient funding to meet its liabilities as they fall due.”
The business has appointed KPMG as administrators.
Last week the firm, which employs 3,000 people, described the extent of the alleged fraud as “devastating” as it revealed that thousands of false entries had been made on the company’s ledgers.
Former chief financial officer Chris Marsh was arrested and released on bail days after the scandal was made public in October, and accounting firm Grant Thornton is facing a probe by the Financial Reporting Council (FRC) over its audit of the company’s finances.
Laith Khalaf, Senior Analyst at Hargreaves Lansdown, said "it’s shocking that a fraud of this scale can take place within a listed company," adding "any dim hope investors had of recovering any value from shares they bought in good faith has now been extinguished."
An investigation by the Serious Fraud Office is ongoing.