Babboe cargo bike disaster: Accell lenders fear for their money, KKR is restructuring management

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“The costs of the recalls will be significant”

: In the Netherlands and Germany alone, Accell promises customers a new cargo bike for 15,000 recalled bikes from its Babboe brand. A decision on whether to recall further models is pending.

Photo: Sylvain Robin / Pond5 Images / IMAGO

Kasper Rorsted

(62)

didn't last long at the Dutch bicycle giant Accell.

Barely five months in office, the former Henkel and Adidas boss gave up his mandate as chairman of the supervisory board on March 1st - because of other international tasks, it is said.

As a chief supervisor, you probably can't do much in five months.

Nevertheless, CEO Tjeerd Jegen

(53) thanks

Rorsted "for the important contribution he has made in a short time." The short-term supervisor and senior advisor at Accell majority owner KKR does not have a say in the statement.

His successor:

Annemarie Jorritsma

(72), a political heavyweight as the former economics minister in the Netherlands.

  It remains to be seen

whether she and Jegen and

Gujsberg de Zoeten (57) can get the bicycle company, which has fallen into financial difficulties, back on track.

As of today, Friday, De Zoeten unexpectedly replaces CFO

Toine Doremalen

  , reports the "Financieele Dagbald" (FD), citing an internal communication.

Dormemalen only became CFO in June 2023.

De Zoeten is considered an experienced restructuring and reorganization expert.

The newly reconstituted management probably doesn't have much time left.

Because the heavily indebted Accell Group obviously needs fresh money.

And the company's lenders appear to be losing trust; they have hired consultants to position themselves in the event of a possible debt restructuring, two insiders from corporate and financial circles confirm to manager magazin.

Bloomberg and the “FD” had previously reported on it.

Like many competitors, Accell is struggling with sluggish demand while warehouses are still well-filled, which the industry is trying to address with significant price discounts.

The group is also currently burdened by mass recalls of its Babboe cargo bike brand, which - depending on the outcome of negotiations with the authorities in a good 30 countries - could cost it a high double-digit million amount or more.

KKR reacts to crisis: New management and possible debt restructuring

Even before the recall, the financial situation of the company, which has more than a dozen bicycle brands under its umbrella,

including

Sparta, Ghost

and

Haibike , was very strained.

“We believe the current capital structure is unsustainable due to a significant decline in earnings with only a gradual recovery from 2025,” Fitch analysts wrote in late 2023, cutting the rating for the third consecutive time.

Fitch believes that Accell will hardly make a profit in the 2023 financial year.

The group is "vulnerable to payment defaults." Accell's liquidity position is "weak," Moody's also noted in a note in December.

It is precisely this vulnerability that a group of lenders now fears and is bringing advisors on board - including from the investment bank Houlihan Lokey and the law firm Milbank, it is said.

The insiders do not confirm that the creditors will soon be negotiating a possible debt restructuring with the majority shareholder KKR, Accell management and banks, but they do not rule out such negotiations at a later date.

Neither Accell nor KKR currently want to comment on reports of a financial restructuring.

KKR took Accell off the Amsterdam stock exchange in the summer of 2022 for around 1.56 billion euros and granted the bicycle company loans worth 250 million euros last year.

KKR financed the purchase price primarily with loans from banks, which sold them on to investors.

Accell is said to be more than one billion euros in debt, but is not commenting on that either.

According to FD information, KKR has already written off 20 percent of its Accell stake.

It is currently unclear whether and how much money the private equity investor will inject, but it is likely: “KKR believes in Accell” – despite the current problems in the bicycle industry, according to people in the circles.

The investor has “long staying power,” holds onto his investments for years and doesn’t immediately sell them off if problems arise, says another insider.

KKR is invested in more than 100 companies and generated a return of 16 percent last year.

Social plan negotiations in the Netherlands

The expectations of the newly formed management are clear: "Accell must return to a profitable growth path and address the problems as quickly as possible," say the people in the circles.

Jegen, who has now been in office for a good four months, has set the first course and wants to continue saving costs: Production of the Ghost brand in Waldsassen, Bavaria, has stopped and is to be relocated to Turkey and Hungary.

There are also plans to cut jobs at the traditional British brand Raleigh.

At the Dutch headquarters in Heerenveen, Jegen wants to shut down one of two factories and also relocate production abroad, which will result in the loss of 150 jobs.

The FNV union and management wanted to resume negotiations on a social plan and severance payments this week after FNV rejected a final offer.

Decision on further mass recall at Babboe

It is certain that Accell will also restructure Babboe.

Just a few days after "RTL Nieuws" reported on obvious grievances at the cargo bike manufacturer on February 9th based on interviews with five employees, the parent company replaced the responsible managing director,

Pippa Wibberley,

with

Gerard Feenema

.

Almost at the same time, the Dutch Consumer Product Safety Authority stopped the sale of all Babboe cargo bikes due to the threat of frame breakage.

Babboe has so far recalled 15,000 cargo bikes for two models in the Netherlands and Germany alone.

The manufacturer promises owners a voucher for a new bike or a replacement cargo bike.

With sales prices of 3,000 euros and up, the replacement costs for these wheels alone amounted to 45 million euros.

According to information from manager magazin, a decision will be made in the next few days as to whether Babboe will recall four more models from the road in the Netherlands, which would then probably also be implemented for other countries.

“If they really have to replace all the bikes, then the manufacturer is threatened with financial catastrophe,” said an industry expert recently in an interview with manager magazin.

The Babboe disaster could drag the Accell Group further into the depths.

Preventing exactly that is now the task of the new management.

How it regains customer trust is another matter entirely.