Moody's downgrades Accell

Moody's Investors Service said it downgraded Sprint BidCo BV's (Accell Group) corporate family rating to B2 from B1, its probability of default rating to B2-PD from B1-PD and the instrument rating of the €705 million backed senior secured term loan B due June 2029 and the €180 million backed senior secured multicurrency revolving credit facility due December 2028 to B2 from B1. The outlook was changed to negative from stable.

"The rating downgrade to B2 from B1 reflects Accell's much higher-than-anticipated financial leverage, as the wide supply chain disruptions experienced in 2022 severely hit the company's profitability and free cash flow generation. This led to a significant deterioration in the company's liquidity position and to higher debt levels to face an extraordinarily high inventory build-up," said Giuliana Cirrincione, Moody's lead analyst for Accell, in a press release.

The agency noted Accell’s Moody's-adjusted gross debt to EBITDA ratio was greater than 7x at December 2022, which compares to the 5.6x adjusted starting leverage (pro forma for the transaction) as estimated when the rating was first assigned last year. Accell’s adjusted gross debt to EBITDA is expected to stay higher long and decline to 5.5x towards the end of 2024.

However, healthy demand for electric bikes supports the ratings. Additionally, Moody’s said dealers did not cancel orders despite supply chain issues, and there is a backlog through 2024 from Central Europe, which is the company’s largest business unit.

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