Patisserie Spent Undisclosed Overdraft, Sunday Times Reports

(Bloomberg) -- Patisserie Holdings Plc spent a previously undisclosed 10 million pound ($13 million) overdraft before an accounting scandal erupted, then passed on a rescue deal that would have protected small shareholders, U.K. newspapers reported on Sunday.

The company had used previously unreported overdrafts of 9.7 million pounds with Barclays Plc and HSBC Bank Plc before it announced accounting errors that threatened to put it out of business, the Sunday Times said, without identifying where it got the information.

Once the problems emerged, investment fund Crystal Amber offered a 30-million pound rescue package that would not have diluted any shareholder, the Sunday Telegraph reported, citing fund head Richard Bernstein. The offer was ignored, the newspaper cited him as saying.

Instead, Patisserie Chairman Luke Johnson said he’d lend 20 million pounds to the cake baker and that it will also raise 15.7 million pounds by issuing new shares at 50 pence each, an 88 percent discount from Tuesday’s closing share price.

The U.K. Serious Fraud Office opened a criminal probe into the matter. Chief Financial Officer Chris Marsh was arrested Thursday night and released on bail. He has been suspended from his position.

Calls to Patisserie Valerie outside of regular business hours went unanswered on Sunday morning.

To contact the reporter on this story: Franz Wild in London at fwild@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Amy Teibel, Steve Geimann

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