Patisserie Valerie in last-ditch talks with banks over cash lifeline to avoid administration

Scandal-hit cake chain’s credit facilities expired on Friday; major shareholder Luke Johnson holds talks with HSBC and Barclays

Ben Chapman
Monday 21 January 2019 11:41
Patisserie Valerie finance chief arrested after black hole found in accounts

Patisserie Valerie faces a crucial day of talks with lenders as it seeks a cash lifeline to avoid collapsing into administration.

Major shareholder Luke Johnson is holding meetings with HSBC and Barclays after the troubled cake chain’s credit facilities expired on Friday.

Patisserie Valerie last year discovered a £20m hole in its books resulting from “significant, and potentially fraudulent, accounting irregularities”.

If a deal with creditors cannot be agreed, an administration could put the future of some of Patisserie Valerie’s 2,800 jobs at risk.

KPMG has been appointed to review all options for the company, including a sale and a debt-for-equity swap with creditors.

Patisserie Valerie said on Monday it was “still in discussions with its bankers to extend the standstill of its bank facilities”. An update will be issued after those negotiations conclude, the company said.

Last week Patisserie Valerie said it had uncovered “very significant manipulation of the balance sheet and profit and loss accounts”.

Mr Johnson, a serial entrepreneur who made his fortune investing in Pizza Express, pumped in £20m of his own money shortly after the scandal erupted in October. The company also raised almost £15m in a share issue.

Mr Johnson’s stake had been worth around £160m prior to the revelations.

The company said in a statement last week: “The work carried out by the company’s forensic accountants since [October] has revealed that the misstatement of its accounts was extensive, involving very significant manipulation of the balance sheet and profit and loss accounts.

“Among other manipulations, this involved thousands of false entries into the company’s ledgers.

“It will take some time before a reliable trading outlook can be completed while the above work streams progress.

“The initial indications from the work carried out to date is that the cashflow and profitability of the business has been overstated in the past and is materially below that announced in the trading update on 12 October 2018, which was based on limited work carried out over a 48-hour period.”

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