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Patisserie Valerie collapses into administration as rescue talks fail Patisserie Valerie collapses into administration as rescue talks fail
(35 minutes later)
Troubled cafe chain Patisserie Valerie has collapsed into administration after the failure of rescue talks with banks.Troubled cafe chain Patisserie Valerie has collapsed into administration after the failure of rescue talks with banks.
The company, which has almost 200 outlets and employs 3,000 people, said it did not have enough money to meet its debts. The firm, which has almost 200 outlets and 3,000 staff, said it did not have enough money to meet its debts.
Administrators from KPMG said 70 stores will close immediately, meaning a "significant number of redundancies". Administrators KPMG said 70 cafes will shut immediately, meaning "significant" redundancies. The BBC understands this could be up to 900 posts.
In October, Patisserie Valerie uncovered "significant, and potentially fraudulent, accounting irregularities".In October, Patisserie Valerie uncovered "significant, and potentially fraudulent, accounting irregularities".
The company's biggest shareholder and chairman, Luke Johnson, had been in talks to extend a cash lifeline from HSBC and Barclays.The company's biggest shareholder and chairman, Luke Johnson, had been in talks to extend a cash lifeline from HSBC and Barclays.
Patisserie Valerie's statement said that Mr Johnson had personally extended an unsecured, interest-free loan to help ensure that the January wages are paid to all staff working in the business. Mr Johnson has personally extended an unsecured, interest-free loan of £3m to help ensure that the January wages are paid to all staff working in the business.
"This loan will also assist the administrators in trading as many profitable stores as possible while a sale process is undertaken," the statement added. "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 a statement.
In addition to Patisserie Valerie, the company's other brands include Druckers Vienna Patisserie, Philpotts, Baker & Spice and Flour Power City.In addition to Patisserie Valerie, the company's other brands include Druckers Vienna Patisserie, Philpotts, Baker & Spice and Flour Power City.
Finance director Chris Marsh was arrested after having been suspended by the company when the financial irregularities were uncovered.Finance director Chris Marsh was arrested after having been suspended by the company when the financial irregularities were uncovered.
Also under investigation, by the Financial Reporting Council, are former Patisserie Valerie auditors Grant Thornton.Also under investigation, by the Financial Reporting Council, are former Patisserie Valerie auditors Grant Thornton.
KPMG's administrators Blair Nimmo and David Costley-Wood said about 121 stores would continue to trade while a buyer is sought.KPMG's administrators Blair Nimmo and David Costley-Wood said about 121 stores would continue to trade while a buyer is sought.
They said: "Our intention is to continue trading across the profitable stores, as collectively, the brands have a strong presence on the high street and have proven very popular with consumers. At the same time, we will be seeking a buyer for the business and are hopeful of a good level of interest.They said: "Our intention is to continue trading across the profitable stores, as collectively, the brands have a strong presence on the high street and have proven very popular with consumers. At the same time, we will be seeking a buyer for the business and are hopeful of a good level of interest.
"Unfortunately, however, we have had to take the difficult decision to close 70 stores resulting in a significant number of redundancies. We will be working with those affected employees, providing all support and assistance they need.""Unfortunately, however, we have had to take the difficult decision to close 70 stores resulting in a significant number of redundancies. We will be working with those affected employees, providing all support and assistance they need."
The number of job losses is expected to be in the hundreds, but further details were not available because staff have not yet been told. The administrators have not yet announced which outlets are closing, nor how many jobs will go.
Shareholders wiped outShareholders wiped out
Last week, Patisserie Valerie confirmed it had found "extensive" misstatement of its accounts and "very significant manipulation of the balance sheet and profit and loss accounts".Last week, Patisserie Valerie confirmed it had found "extensive" misstatement of its accounts and "very significant manipulation of the balance sheet and profit and loss accounts".
This includes thousands of false entries in its ledgers, the company said in a statement. Profits and cash flow had been overstated and were "materially below" figures announced in October.This includes thousands of false entries in its ledgers, the company said in a statement. Profits and cash flow had been overstated and were "materially below" figures announced in October.
Patisserie Valerie almost ceased trading last year after the discovery of the black hole in the accounts. However, a rescue plan was passed by shareholders in November, resulting in the issue of £15m worth of new shares.Patisserie Valerie almost ceased trading last year after the discovery of the black hole in the accounts. However, a rescue plan was passed by shareholders in November, resulting in the issue of £15m worth of new shares.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said the administration was bad news for shareholders.Laith Khalaf, senior analyst at Hargreaves Lansdown, said the administration was bad news for shareholders.
"Any dim hope investors had of recovering any value from shares they bought in good faith has now been extinguished," he said."Any dim hope investors had of recovering any value from shares they bought in good faith has now been extinguished," he said.
"It's one thing to see a company's shares wiped out by poor trading conditions, or even bad management decisions, it's quite another to see your investment disappear as a result of fraudulent activity," he added."It's one thing to see a company's shares wiped out by poor trading conditions, or even bad management decisions, it's quite another to see your investment disappear as a result of fraudulent activity," he added.
MP Rachel Reeves, chairwoman of the Business, Energy and Industrial Strategy Committee, said the administration "raises grave corporate governance concerns".MP Rachel Reeves, chairwoman of the Business, Energy and Industrial Strategy Committee, said the administration "raises grave corporate governance concerns".
After previous corporate collapses, her committee began looking into the future of auditing in the UK. She said the Patisserie Valerie affair would form part of the inquiries.After previous corporate collapses, her committee began looking into the future of auditing in the UK. She said the Patisserie Valerie affair would form part of the inquiries.