CAFE chain Patisserie Valerie entered into administration yesterday (January 22) after the failure of rescue talks with banks.

The bakery and continental cake shop opened one of its stores in Festival Place in 2017, but the firm began to have financial difficulties in 2018.

The firm said discussions with its lenders HSBC and Barclays to extend a standstill agreement on its debts had failed, leaving it with no option but to appoint KPMG as administrator.

KPMG said it would continue to trade 121 out of 200 stores, but added that 70 cafes and concessions would close over the next few days, resulting in a “significant number” of redundancies.

The cake firm’s parent company Patisserie Holdings has been grappling with the fallout of an accounting fraud since October.

It said on Tuesday evening that the extent of fraud meant it was unable to renew its bank loans and did not have sufficient funding to continue trading.

Chairman Luke Johnson has extended an unsecured, interest-free loan to help ensure that the January wages are paid to all staff working in the ongoing business, the company added.

Blair Nimmo, head of restructuring at KPMG and joint administrator, said: “Our intention is to continue trading across the profitable stores, as collectively the brands have a strong presence on the high street and have proven very popular with consumers.

“At the same time, we will be seeking a buyer for the business and are hopeful of a good level of interest.

“Unfortunately, however, we have had to take the difficult decision to close 70 stores resulting in a significant number of redundancies.

“We will be working with those affected employees, providing all support and assistance they need.”

The bakery firm said an initial investigation pointed to cashflow and profitability being worse than previously thought when the problem was first discovered in October.