Patisserie Valerie discovers £10m of secret overdrafts

Around £9.7m had been run up in total on the two facilities without the knowledge of board members

Patisserie Valerie’s board has discovered £10m of secret overdrafts, in the latest revelation at the scandal-hit cafe chain.

Around £9.7m had been run up in total on the two facilities opened with Barclays and HSBC, the company confirmed.

It came after Patisserie Valerie chairman Luke Johnson saved the chain from collapse with a £20m loan following the discovery of “significant, and potentially fraudulent, accounting irregularities”.

“I believe in the business as an economic entity, so I don’t think it was a wholly emotional decision, but I think there was a moral obligation,” Mr Johnson told the Sunday Times, which first reported details of the overdrafts.

“There were 2,800 jobs at stake, there was 12 years of effort that I and colleagues had put into the business and the board were determined not to allow the business to go into administration.”

Mr Johnson told the newspaper that he knew nothing about the overdraft facilities. “And the banks were as shocked by things as we, the board, were, as I’m sure are the auditors,” he said.

Last week the firm’s finance chief, Chris Marsh, was suspended from the group then arrested on suspicion of fraud. He is now facing a criminal investigation by the Serious Fraud Office.

The company said on Friday that its cash position had been misstated and subject to fraudulent activity which likely affected historical financial statements.

In a stock exchange announcement on Friday afternoon, Patisserie Valerie confirmed that without a cash injection of “no less than £20m”, the company would have no option but to cease trading.

The company has since announced a share placing to raise £15m, while the interest-free loan from Mr Johnson will provide “immediate liquidity”.

While it has been saved, the cash injection values the company at just £68m, a precipitous decline for a business with a price tag of £446m just two weeks ago.