Is the bad KKR bet on cycling at the beginning of the private stock account in Europe?

With the constipation of Lockdowns in Europe in late 2020, KKR was fighting to grow its flag in one of the winning industries in the epidemic.

The private stock pioneer lost that year in an attempt to the German -road bicycle maker, Instagram. But bankers later photographed KKR makers of consolation: Access, the lowest Dutch manufacturer.

This has led to an investment that could become one of the worst giant seizure in New York in Europe.

KKR launched a 1.8 billion euro offer to take Access Private with the support of its largest contributor, Teslin, in January 2022. that month represented the peak of a boom in the deal fed by cheap money and optimism about how the epidemic motivates the dependence of new technology both permanently and work factors alike.

By August when it was deleted from the Amsterdam Stock Exchange, the central banks were fighting to contain inflation with the high interest rates, while consumers were pressured by high energy costs in the wake of Russia’s full invasion of Ukraine. The boom has ended.

Less than two years later, Accell found itself struggling under the burden of her debts as it left her post -sales stagnation in burning her. The Bikemaker had no choice but to resort to lenders for help. Last month, Accell recently closed the restructuring deal that provides a lifeline, reduced 600 million euros of debt burden by 1.4 billion euros.

But for KKR and Teslin, who kept the minority share in Accell, the price of this decline was sharp. Although they continued to control the company, the duo had to deliver nearly 20 percent of the Access to ACCEL to a group of lenders, and KKR had to write the value of the stock investment of 1.1 billion euros only 30 months ago.

The two partners that led the deal with KKR in the company no longer, although someone familiar with the circumstances said that their departure was not relevant. Next month, Accell will continue to the third CEO of KKR.

Besides the effects of the deal on KKR, Accell problems provide an early taste of pain that may wait for us to private stock groups that have accumulated in a boom in making trillion dollars in late 2020 and early 2022. Many executives and investors now say that the wave of deals can be among the worst in the history of industry.

Dan Rasmussen, founder of the hedge fund in Boston, said, ”

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The quiet roads and the time of the Kofid -19 vacuum opened a small fire under the industry of cycling in Europe, which helps to push Access 17 percent to 1.3 billion euros in 2020.

When KKR and Teslin launched their show at the beginning of 2022, they believed that there was still room to improve business. Accell was already on the acquisition of the acquisition, and the purchase of brands in the United Kingdom, North, France and Germany. But KKR has seen ways to grow – as well as to reduce costs by integrating operations and pressing better conditions than suppliers, according to people who have knowledge of the issue.

The timing was unfortunate, and things soon became difficult.

“They moved away from Accell because they believed” benefiting from a boom that will not last. ” Another person who is familiar with commercial activity said that the KKR investment “was not the wise timing,” adding that the company “bought the company in Peak”.

KKR expected the demand for traditional bikes to diminish after the epidemic, and in 2022, ACCell traditional bike sales decreased by 4 percent. But the American Special Stock House witnessed a bright future in electronic bicycles, as Accell was a pioneer in the market.

However, the growth of Accell electronic bicycle sales was less than expected, as supply chain disorders have led to a decrease in some major components. The acquisition group has reduced the company’s excessive amount in the company, in response to the increasing demand for the epidemic.

Inventories balloon. The Access Poor Store increased by 50 percent to 540 million euros in 2022, multiplied by its accounts, a group of final bikes and other products to approximately 380 million euros.

Accell was not alone in excessive arrangement. Manufacturers throughout the industry ordered statements from parts to “believe that the request (the era of the epidemic) will continue after the custody, which did not do,” according to Kirstein Hink, the consultant of the Mobile Mobility Industry.

To change the stocks, Accell had to provide discounts in 2023. Revenue decreased by 10 percent that year. She reduced the value of her stock, and took weakness that led to profits of about 90 million euros in 2022 to a loss of 330 million euros.

By mid -2023, Accell has turned into its shareholders to order more money. Ultimately, KKR and Teslin paid the company about 300 million euros of loans before the restructuring was completed, including 50 million euros when Babboe Cargo bikes, made for carrying children, were required due to safety concerns.

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One of the lenders, who was “very unhappy” with KKR, said about how to invest Accell, that it is “very unusual” for a special “prestigious” stock company to start thinking about restructuring a business after only two years.

KKR funded the private sector in 2022 in the amount of 1.1 billion euros of shares, and it was issued at 700 million euros of unwanted categorical debts taken by Access. By the time when lenders who secured the acquisition loan at the time of the deal came to sell it in September 2022, they had to accept a deep discount due to the broader shifts in debt markets.

Then, by June 2024, ACCell was to restructure negotiations after it forced her to do a bad bicycle season to develop a new action plan.

After more than 20 meetings between consultants to Access and lenders, the company announced in October that it had concluded a deal and the company’s operational debts will be reduced from 1.4 billion euros to 800 million euros.

KKR and Teslin had to convert a large part of shareholders ’loans to stocks, according to two people familiar with the situation, with the rest of the rest. Along with external lenders, the group kicked another 235 million euros to maintain the company.

KKR said it was an “supportive contributor” to Access, including by correcting the deep market that affected the entire (bike) industry. ” In a joint statement with Teslin, she added that “along with the operational improvements that were conducted during the past year and the enhanced management team”, the restructuring agreement “is a milestone sign towards enabling the presentation of the Accell strategic plan.”

“The company was a reserved player with a strong group of huge brands and synergy to be achieved” that “he will be able to get out of the industry level on an equal level.”.

A new birth may take some time. Fitch rating last month noted that although restructuring was materially reduced from the company’s debts, it should decrease, over time, to a more sustainable level, “high implementation risks” have witnessed the ACCEL transformation plan, given the “weak implementation of its previous initiatives since 2022”.

The lender was disappointed, noting that the company’s senior management has changed repeatedly in a short period. “The KKR work capacity in the field of bicycle manufacturing is not good,” they suggested. And “it seems, apparently, the market has not recovered.”

As one of the first private stock purchases in the era of the epidemic to enter the full restructuring, Accell may be Canary in the European Coal Mine of the epidemic crop of private stock deals that have been subjected to high assessments. More in the United States has already started acidity.

“Signs of danger to a real problem for this group of deals will be longer, more modified and expand debt deals,” said Rasmussen of Ferrad.

A report published earlier this month by Bain & Co consultations noted the similarities between the era of the Covid era of the private stock fund and those that were launched directly before the global financial crisis.

“These models took more than nine years, on average, to return the capital to investors,” Payne pointed out: for two years longer than the regular private stock box life cycle. Payne said that the pattern raises “fears that the capital presented in the current portfolios will take a long time, or even longer, to recover.”

The exceptional large money collected during the fever 2021 and 2022 and the noble prices they paid to assets add to the risks.

As Payne said, “What history tells us is that such periods take time to relax.”