Raleigh owner Accell’s credit rating downgraded for fourth time in a year, as group’s cargo bike company slammed for “shambles” recall of faulty frames

Accell Group’s year to forget continues as the Dutch company, which owns bike brands such as Lapierre, Raleigh, and Ghost, along with beleaguered cargo bike manufacturer Babboe, has suffered its fourth ratings downgrade in a year, just months after cutting around 150 jobs in a bid to “simplify operations and enhance efficiency”.

After downgrading the company to a CCC rating and branding its financial situation “unsustainable” in December, credit rating provider Fitch Ratings has now dropped Accell to a CCC- rating, citing its “weak operating performance, tight liquidity, and negative free cash flow results” which have resulted in “unsustainable credit metrics”.

Since its previous credit downgrade before Christmas, Accell has endured a torrid period exacerbated by management changes hindering its attempt to steady the financial ship, as well as the broader issues impacting the struggling bike market at the moment, such as excess inventory levels, weak consumer demand, and heavy discounting.

In February, the group announced a wave of job cuts as Accell’s Dutch-based facilities were merged and some production relocated across Europe, just weeks after redundancies at Raleigh were confirmed as part of a restructuring process at the iconic British bike brand’s Nottingham headquarters.

> Raleigh owner Accell Group to cut jobs and streamline European production to "simplify operations and enhance efficiency"

Since then, Accell’s cargo bike company Babboe has been embroiled in a controversy over an investigation in February that revealed it was aware of the sale of faulty frames, with the Dutch brand even accused of attempting to cover up the defects and allegedly forcing staff to “make up stories” to hide the issues from customers.

And despite announcing in April that 22,000 cargo bikes will be recalled and replaced, according to the NL Times this week only 6,000 of those faulty bikes have been collected and just 500 replaced – while thousands of costumers wait for their potentially unsafe bike to be inspected.

The Dutch press have also reported that thousands of customers have complained on Facebook groups that they have not been able to get hold of Babboe, or that the company claims it does not recognise their bike’s frame number.

“My children are nine, seven, and three-years-old, and one is five months old, so I always had a few in the cargo bike. Now, I haven’t been able to ride it since February,” Natalie Rijneveen told AD.

“The frame number of our cargo bike is not recognised, and phone calls yield no results. Customer service is inaccessible, or you get people on the line who know nothing about it.”

> Cargo bike company Babboe announces replacement programme for 22,000 faulty frames after attempted cover-up of manufacturing defects

According to Fitch Ratings, the turmoil of recent months has contributed to the uncertainty currently surrounding Accell’s recovery process, which may result in further restructuring and job losses.

“We see substantial operational challenges as the company is overhauling its product portfolio and business processes around manufacturing, logistics, and procurement,” the credit ratings agency said in its report.

“These efforts are further exacerbated by sell-in challenges in addition to the costs of its Babboe recall. Business seasonality and the sector’s challenges mean the second and third quarters are critical for Accell Group’s recovery.”

Fitch’s report also noted that Accell now relies on its shareholder KKR, which provided a loan of €298 million last year. Fitch said this loan “confirms the shareholder's strong commitment to the business. However, the lack of visibility on the pace of recovery means we cannot accurately assess how long the available shareholder commitment and whether additional capital injections would be needed.”

“We project the EBITDA [earnings before interest, taxes, depreciation, and amortization] to remain weak and barely above break-even, as manufacturers, including Accell Group, will be forced to continue their discount policy. Moderate market normalisation is anticipated only from 2025,” the agency concluded.