Patisserie Valerie’s chairman has swooped in with a rescue loan package after a black hole in the company’s accounts led to its finance chief being arrested on suspicion of fraud.
Luke Johnson has pledged up to £20 million in new loans in order to keep the chain’s parent company Patisserie Holdings afloat after a wind-up order was issued against it by the taxman.
Mr Johnson, a serial entrepreneur, is the largest shareholder in Patisserie Holdings with a 37% stake.
The company also plans to raise as much as £15 million through the issue of new shares.
Funds raised through the share placement will be used to pay back around half the money loaned by Mr Johnson, as well as to meet outstanding liabilities including the £1.14 million bill owed to HM Revenue & Customs.
In a statement issued to the market on Friday afternoon, Patisserie Holdings said the loans would enable it to continue trading for the “forseeable future”.
It had been feared that the company could go into administration as soon as this week, with advisers at PwC thought to be on standby for a collapse.
Directors also confirmed on Friday that the group has net debt of approximately £9.8 million.
Historical statements on the cash position of the company were misstated and subject to fraudulent activity and accounting irregularities, directors said.
The group’s finance director Chris Marsh, who was suspended from his role earlier this week, has been arrested on suspicion of fraud, but was later released. Hertfordshire Police said: “A 44-year-old man from St Albans has been arrested on suspicion of fraud by false representation.
“He has been released under investigation.”
The probe is being led by the Serious Fraud Office (SFO). The SFO said: “Following this morning’s Regulatory News Service announcement by Patisserie Holdings PLC, the SFO confirms that its director has opened a criminal investigation into an individual.
“We can give no further information or comment at this time.”
The arrest was followed by the closure of some shops on Friday. Landlords for at least two Patisserie Valerie locations in London – in Hammersmith and Edgeware Road – cancelled their lease agreements with the company over breach of contract.
It is understood that the company has failed to pay rents.
Patisserie Holdings said on Wednesday that it has been notified of “significant, and potentially fraudulent, accounting irregularities and therefore a potential material mis-statement of the company’s accounts”.
This significantly affected the company’s cash position, with the firm saying it could lead to a “material change” in its overall financial position.
Mr Marsh was later suspended from his role and accountancy giant PwC drafted in to look through the company’s books.
To compound its troubles, Patisserie Holdings has also received a winding-up petition for its principal trading unit Stonebeach, with a hearing now scheduled for October 31.
It relates to £1.14 million owed to HMRC. Patisserie Holdings – which owns additional brands such as Druckers, Philpotts and Baker & Spice – trades from more than 200 stores and also has a partnership with Sainsbury’s, with branded counters present in the supermarket.