Patisserie Valerie has been saved from closure after chairman Luke Johnson agreed to lend the struggling company £10m, days after a black hole in the firm’s accounts was uncovered.
Earlier this week, the firm’s finance chief, Chris Marsh, was suspended from the group after the bakery chain uncovered “significant, and potentially fraudulent, accounting irregularities”.
On Thursday night, Mr Marsh was arrested on suspicion of fraud, and is now facing a criminal investigation by the Serious Fraud Office.
The company said on Friday that historical statements on the cash position of the Company were mis-stated and subject to fraudulent activity and accounting irregularities, and the activity and irregularities are also likely to have affected historical financial statements.
The accounting crisis put thousands of jobs at risk, with Patisserie Valerie admitting on Wednesday that the gap in its accounts had “significantly impacted the company's cash position and may lead to a material change in its overall financial position”.
On Thursday, the group said that unless it could receive an “immediate injection of capital”, it would be forced to stop trading, putting 2,500 jobs at risk across the UK.
In a statement to the London Stock Exchange on Friday afternoon, the group confirmed that without a cash injection of “no less than £20m”, the company would have had no scope to continue trading.
The company has since announced a share placing to raise £15m, while the loan from Mr Johnson will provide “immediate liquidity”. The funding from the company’s chairman has been made on an interest free and fee free basis, and is to be repaid over a three-year period.
Following an initial investigation, the directors of the group said its net debt stood at £9.8m, but added that “shareholders should be aware that the investigations into the company's financial irregularities remain at a very preliminary stage, and will be subject to further, comprehensive review in the weeks and months to come”.
Before the rescue deal was agreed, a number of branches in London were shut on Friday as landlords terminated leases due to non-payment of rent.
The firm also revealed this week that HMRC had filed a winding up petition against its main trading subsidiary, Stonebeach, over an unpaid £1.14m tax bill.
Julie Palmer of accounting firm Begbies Traynor told the BBC on Friday that the winding-up petition had been issued last month, giving the group 21 days to deal with the issue.
“There is a whole sequence of events here where we're talking about a listed company which until Wednesday was worth over £400m,” she said.
"It is actually quite staggering that [the winding-up petition] has happened without any notification to the stock market and I believe even the board said they weren't even aware this had been served on the company."
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