Patisserie Valerie has nearly £10m in unreported loans

Patisserie Valerie, the British café chain has found a potential fraud on its accounts, had used up £9.7m on two separate bank credit liens without the board’s knowledge.

Patisserie Holdings, the chain’s parent company,  confirmed the discovery of the overdrafts, at Barclays and HSBC, Patisserie Valerie secure a lifeline on Friday when Luke Johnson, the executive chairman of its parent company, committed up to £20m of his own cash in loans, and shareholders backed a deeply discounted share sale.

Last week, Chris Marsh, the finance director was suspended from his post and arrested before being released on bail without charge. The company said it had net debt of £9.8m rather than the £28m cash it recorded at the end of March, Mr Johnson’s cash injection allowed the chain to avoid being forced into administration. The share sale will raise £15.7m from new and existing institutional share holders, as 31.45m shares were sold for 50 pence each or 88 per cent below the quoted 429.50p level where they last traded before suspension on last Wednesday.

Once the share sale is completed £10m will go to pay back a bridging loan that Mr Johnson gave to the company to cover immediate outstanding liabilities. The lifeline also enabled the company to protect 2. 600 jobs of people who work at its 206 shops.

Mr Johnson’s private equity vehicle, Risk Capital Partners, bought an 80 per cent stake in Pattisserie Valerie  from Scalzo family in 2006 for £6m and was the  most successful investments before the accounting allegations merged.