The troubled cafe chain Patisserie Valerie could collapse this week if last-ditch talks with its banks fail.
Luke Johnson, Patisserie Valerie’s leading shareholder, has been seeking to extend a standstill agreement on its bank facilities – protecting the chain from action to recover debts – which officially expired at midnight on Friday.
On Monday morning the company issued a statement saying that talks with its banks continued and it would provide an update when they were concluded.
Without an agreement, the company’s lenders, HSBC and Barclays, could demand repayment of debts that may amount to nearly £10m, potentially forcing Patisserie Valerie to call in administrators.
Other options include a second bailout by Johnson, the multimillionaire chairman of the business, who pumped £20m of his money into Patisserie Valerie to keep it afloat after the company uncovered “potentially fraudulent” accounting irregularities and a financial black hole in October. Johnson was paid back £10m after other shareholders later put up £15m in new funds.
The company, which operates 200 cafes and employs 3,000 staff, is expected to provide an official update on its position to the stock market on Monday.
In a statement last week, Patisserie Valerie warned profits would be “materially below” the estimated £12m when the company first flagged up fears of fraud. It said cashflow was also much lower than expected.
The chain revealed it had hired the advisory firm KPMG to consider all options, raising speculation that Patisserie Valerie could be facing insolvency, mass store closures or a debt-for-equity swap.
On Sunday, Johnson could not be contacted, and Patisserie Holdings declined to comment on developments over the weekend.
Shareholders in Patisserie Valerie, which was previously valued at £450m, are braced for considerable losses. Shares were suspended in October and have yet to restart trading.
The company’s finance director, Chris Marsh, was arrested by Hertfordshire police and bailed in October. He resigned that month. The Serious Fraud Office confirmed it had opened a criminal investigation into an individual but has not given further details.
