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January 21, 2019

Patisserie Valerie could collapse following accounting shortfalls

By Joe Pickard

UK café chain Patisserie Valerie could collapse in the next couple of days if emergency talks between major shareholder Luke Johnson and its lenders fail, according to The Sunday Times, after accounting shortfalls first discovered last year were found to be much more extensive than initially thought last week.

According to the report, Johnson has been working to extend a ‘standstill agreement’ on the company’s bank facilities, which expired on 18 January. If this fails HSBC and Barclays could demand repayment on £9.7m ($12.46m) of overdraft debt.

In its statement last week the company said, as well as other manipulations, thousands of false entries were made into the company’s ledgers.

In October, the accounting shortfalls were believed to be in the region of £20m. At the time the directors of the company believed that ‘without an immediate injection of capital’ the business would not be able to operate in its current form.

Johnson then provided the company with this money to help it stay afloat. It was reported by the BBC that Johnson holds a 37% share in the company.

The company said in its statement on 16 January that it had employed the services of KPMG to help it assess its options in order for it to recover, and since October it had undergone a range of changes to its leadership, including the appointment of a new CEO. 

Grant Thornton, who was acting as the company’s auditors at the time of the discovery of the misstatements, has since been replaced by RSM. The company noted that it would take some time to complete a restatement of its accounts and audited figures to 30 September 2018 due to the fraud and accounting issues.

Patisserie Valerie’s parent company, Patisserie Holdings, this morning issued a statement with the London Stock Exchange which said it would issue an update once the discussions with the banks had concluded.

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