Few crumbs of comfort for creditors
Patisserie Valerie collapse leaves a very sour taste
PATISSERIE Valerie’s creditors are unlikely to get back all of their money, even if the business is rescued, sources close to administrator KPMG say.
Last week the cake and coffee chain collapsed into administration, after lenders HSBC and Barclays refused to throw it a lifeline.
Patisserie Valerie had been in a state of crisis since October after the discovery of a £40million black hole in its accounts and potential fraud. The Serious Fraud Office is investigating an individual.
KPMG has received a number of bids for the business and a shortlist will be drawn up this week.
Despite the doubts that surround Patisserie Valerie’s historical financial records, the accounting and insolvency group is confident it has identified which stores can be saved, based on the trading it had seen.
A KPMG spokesman said: “We are pleased with the level of interest shown in the business so far and the joint administrators will update with further details on this in due course.”
Although 122 shops remain open, KPMG has closed 71 loss-making outlets and concessions. Given the scale of the closures, sources say it is likely suppliers, lenders, landlords, staff and other creditors will suffer losses. As they are all unsecured creditors, any losses will be split equally.
The scale of the losses would be higher, had it not been for the £15.7million of funds shareholders injected into the business in November in an attempt to save it. Patisserie Valerie chairman Luke Johnson also gave the firm a £10 million interest-free loan.
The collapse of Patisserie Valerie rendered its shares worthless, leaving investors seething. Fundamental Asset Management co-founder Chris Boxall said that it has held talks with other Patisserie investors about taking legal action and that the affair had left him wary of investing in companies that Johnson is involved with.
He added that Patisserie’s collapse has dented investor confidence in small growth companies. Boxall said: “I have never seen anything like it. This has not done much for the reputation of smaller companies.”
However a source at Patisserie Valerie’s third largest shareholder Octopus Investments, which had a stake worth £36million, said that it would “take the loss on the chin”.
Cavendish Asset Management senior fund manager Paul Mumford said: “The money we put in was relatively small but the cost of the litigation will be high. Who would you go after? The directors? The auditors? Would litigation solve much?”
The Financial Reporting Council, the accountancy profession’s regulator, is investigating Patisserie Valerie’s former auditor, Grant Thornton. Phil Harris, portfolio manager at EdenTree Investment Management, said: “A thorough investigation is required into how this listed, and recently floated company, could have passed a detailed audit process.”