Fri 10/06/2023 10:45 AM
The following is taken from a rating update by S&P. The original can be viewed HERE.
- In the first half of 2023, Dutch e-bikes manufacturer Accell Group reported negative free operating cash flow (FOCF) after leases of about €187 million due to persistently high working capital outflows. This constrained the company's liquidity and forced the drawing of a €75 million asset-backed loan (ABL) and €70 million intercompany revolving credit facility (RCF) provided by shareholder KKR, which we treat as debt.
- We expect Accell Group to sustain a high level of inventory of finished goods over 2023, which will likely be disposed of through material discounts. Nevertheless, there is limited visibility on the liquidity support the inventory reduction will provide, given the hefty discounts in the industry and the soft macroeconomic environment.
- We believe Accell Group depends on favorable business conditions to meet its financial commitments, unless its liquidity position is restored through new liquidity lines or other types of external shareholder support and its working capital starts to normalize over the next few quarters.
- We therefore lowered our long-term issuer credit rating on Accell Group's parent company Sprint Holdco B.V. and its senior secured term loan B issue rating to 'B-' from 'B' and placed them on CreditWatch with negative implications.
- The CreditWatch placement reflects the risk of a downgrade if Accell Group's liquidity position is not addressed in the next few months, either through the reception of external funding support (new bank lines or shareholder support) or a material unwinding of its working capital that would translate into at least neutral FOCF after lease payments.
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