Big Four firm KPMG will lead the administration, having been hired last week to advise after the business revealed that the accounting irregularities which brought it close to collapse last October were worse than previously thought. More than 3,000 jobs are now at risk.
In a statement to the stock market today, parent company Patisserie Holdings said that as a “direct result of the significant fraud”, 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”.
KPMG said that 70 of the chain's stores and concessions would close immediately, with up to 900 redundancies. "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,” said Blair Nimmo, joint administrator. “At the same time, we will be seeking a buyer for the business and are hopeful of a good level of interest."
Following the collapse of the negotiations with HSBC and Barclays, Patisserie Valerie chairman and major shareholder Luke Johnson provided a personal, unsecured and interest-free loan of £3m to help ensure that January's wages were paid to all staff working in what is left of the business. The loan is also intended to help the administrators keep as many profitable stores as possible trading while they are trying to sell the business.
Patisserie Valerie shocked the market in October 2018 when it announced that it had found “significant and potentially fraudulent” accounting irregularities, was suspending its shares and its CFO, Chris Marsh, and had just discovered that HMRC had issued a winding-up petition against its principal trading subsidiary.
Two days later, Marsh was arrested and released on bail without charges. Since then Patisserie Holdings uncovered two secret bank overdrafts at HSBC and Barclays which added £9.7m to the debt burden. After chairman Luke Johnson put in £20m of his own money to save the business from going under, he was forced to go cap in hand to Patisserie Holdings’ shareholders to raise an extra £15m.
The Financial Reporting Council is investigating former auditor Grant Thornton’s work at Patisserie Valerie for 2015, 2016 and 2017. RSM was recently appointed to replace GT.
The Serious Fraud Office has also opened an investigation into Patisserie Valerie.