But convertible into what?

Patisserie Valerie’s management snubbed a £30m deal that would have protected small investors, it has been revealed, as furious shareholders rounded on the company last night.

Investment fund Crystal Amber was plotting a convertible debt deal to rescue the firm which would have meant investors would not have seen their stakes diluted by the emergency fund raise that offered up new shares at a huge discount.

Convertible into equity. Which means dilution, doesn’

7 thoughts on “But convertible into what?”

  1. Saving it from the knackers yard was the short term imperative. Working out what went wrong and if it is a viable business is what tells you if the rescue was worth it. Far as I can tell, they haven’t done that yet.

  2. Dunno. You can conceive of such things.

    Journos are of course loose in terminology. If ‘management’ held 50% of shares and ‘investors’ held 50% of shares (say) 500 and 500.

    NewInvestor comes in and puts money in for 500 shares. ‘Investors’ get a bonus issue 1 for 1.

    ‘NewInvestor’ owns 25%, ‘Management’ own 25%, ‘Investors’ own 50%.

    Not saying at all that’s what was planned. Just saying the way things are reported is usually poor.

    ‘Management’ are of course also shareholders in the above scenario but if they were the founders, they may not be ‘investors’ beyond having paid for shares at par when the company was formed.

    No idea about the details of this case. Just drawing a scenario which would fit.

  3. Non-story. They got bailed out by a £20.million loan from Luke Johnson, with no dilution. Seems the problem was an undisclosed overdraft from 2 banks. Beats me how the credit officers at the banks could have reviewed the annual accounts and not noticed that their own loan facility was not reported.

  4. @ Alex
    The BBC reports that, following and *in addition to* the £20m of loans from Luke Johnson, they raised another £15m of equity capital.
    Undoubtedly Luke bailed them out as the equity would have been worthless before he made the loan.
    Credit officers at the banks get annual accounts, which are published once a year, months in arrears, and management accounts prepared by, or under the supervision of, the CFO. It is not too difficult to believe that the CFO prepared three slightly different variants of the management accounts for the board and the two banks (with no overdrafts in one set and one overdraft in each of the others).

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