Bicycle maker Accell has run into serious problems in a short time

In 2020, bicycle manufacturer Accell, known for Batavus, Sparta and Koga, was in great luck. The corona pandemic had caused people to cycle en masse, and long-term expectations were also good: cities worldwide would invest more in cycling infrastructure. The idea was that this would boost sales of the company’s electric bicycles in particular.

Four years later, Accell, with headquarters in Heerenveen, is in very bad financial shape. So bad that several parties involved are preparing for a legal battle over the company.

Monday reported The Financial Times that several creditors of Accell, which is owned by the American private equity company KKR, fear that they will no longer get their money back. They have engaged advisors from the American investment bank Houlihan Lokey, a source confirmed NRCin case a legal battle erupts over, for example, debt restructuring.

Accell (more than 3,000 employees) has run into enormous problems in a relatively short time. The manufacturer’s stock halls are overcrowded, while the demand for bicycles is much lower after the corona peak. These stocks cost money, and Accell is trying to get rid of bicycles with large discounts.

Large debt burden

A major problem recently arose. Babboe cargo bikes appear to be easy to break in half, as research showed in early February RTL News. Since then, these have not been allowed to be sold by the Dutch Food and Consumer Product Safety Authority (NVWA). A recall is underway, the total costs of which are not yet clear.

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In the meantime, Accell also has to deal with a large debt burden. In 2022, KKR took Accell private from the stock exchange for 1.56 billion euros. It did this with borrowed money, and those debts are now largely on Accell’s balance sheet: 1.2 billion euros in total. This approach, which can often be criticized by trade unions, for example, is common for private equity parties such as KKR. The debts have been bought up by a number of investors, of which a club worth 700 million euros has now united.

It is difficult to estimate exactly how bad the situation is: Accell’s most recent figures are from the beginning of 2023, when the company reported an annual profit for 2022 of 27 million euros. That was already a decrease of 62 percent compared to the previous year. A recent analysis by credit rating agency Fitch estimated that the gross operating profit for 2023 will be 11 million euros.

Convert into shares à la Hema?

KKR expected to benefit from the rising demand for electric bicycles. In practice, it seems that KKR will soon – and not for the first time – have to invest new money in Accell. The question is whether the owner is still waiting for that, or whether he would rather look at debt restructuring or selling profitable parts. This is not necessarily in the interests of creditors: in theory, this could make it even more difficult to pay off debts later.

It may be more attractive for creditors to take over the company themselves by having the debts converted into shares. This would mean that what happened to Hema in 2020 would happen at Accell. There, the creditors also united out of concern about the high debt, after which they eventually took over the company – although this only happened when the then owner Marcel Boekhoorn refused to repay an expiring loan. (Ironic: current Accell CEO Tjeerd Jegen was also the boss of Hema when this company fell into the hands of creditors).

Private equity party KKR took Accell off the stock exchange with borrowed money. These debts are now on Accell’s balance sheet: 1.2 billion euros

There is nothing wrong yet and things can still work out, says an anonymous person involved. Due to the sensitivity of the matter, he does not want to be named. Accell is one of the largest bicycle manufacturers in the world, and its cash flow can also improve. “But people prepare with sharpened knives.”

Being stuck

Accell’s board has now also hired advisors from investment bank Rothschild and Zuidas law firm Stibbe. The board fears that it will become trapped in the battle that may erupt, according to the person involved: what an owner wants or what the creditors want is not necessarily in the interest of the continuity of Accell itself.

The problems at Accell also exist more broadly in the bicycle industry. Other manufacturers are also suffering from a hangover after the corona peak. At the end of 2023, e-bike manufacturer Stella announced that it would have to reorganize for the second time that year. Stocks there had also increased considerably, meaning that these bicycles were sold at significant discounts. And Stella’s shareholders also had to contribute financially.

Accell is now having a doubly hard time, due to the problems with Babboe and the high debt burden. Private equity owner KKR has recently tried to improve the financial situation through reorganisations. Jobs are disappearing in the United Kingdom, Germany and at the Heerenveen factory. There was a work stoppage at the latter location a week and a half ago, because the staff wanted better severance pay. In total, more than half of the more than 300 jobs at the factory could disappear.

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