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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 firm, which has almost 200 outlets and 3,000 staff, said it did not have enough money to meet its debts. | |
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. |
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 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 administrators have not yet announced which outlets are closing, nor how many jobs will go. | |
Shareholders wiped out | Shareholders 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. |