That makes it all the more odd that somebody last week made a €1m bid at 29.5, according to three loan traders, which was then followed up by a bid in the mid-teens.

These did not trade, said sources. But it has raised a question of who would be able to place them given KKR's whitelist restrictions on distressed funds holding the Accell loan and mechanisms within CLOs that would also discourage them from purchasing at such levels.

A major spoke in the wheel for Accell has been depressed demand amid a sector-wide overstocking trend, which led to it heavily discounting its bikes — the trend driving the lion’s share of EBITDA add-backs. Moody’s and S&P cut Accell to Caa1/CCC+ at the end of 2023.

Another jolt

The mystery bid has revived memories of low bids last year for GenesisCare, which had similar restrictive whitelist language and fell into distressed territory. In that case, a buyer in Asia on the whitelist was able get settlement on their mid-teens bid, noted a CLO portfolio manager. The company subsequently went into Chapter 11 protection, breaking the whitelist and sending the loan down sharply, as we reported here.

“Accell is another example, like GenesisCare, of when restrictive language holds people hostage,” said the CLO PM. “You might see 12-15 bids for paper, and while most people might think the value is more and don’t want to take the hit, the fact is these are the only bids out there you’re going to get.”

This is not to suggest the bidder for Accell is the same as with GenesisCare, added the PM. But it could be a similar logic behind the play, and identifying them is hard because the whitelist is extremely difficult to obtain. That has not stopped speculation, of course.

"It's a non-traditional buyer who has somehow been put on a whitelist,” said one of the buyside loan traders. "But regardless, KKR will take the final call if they can hold it or not. The CLO community is figuring out what the right levels are to sell because 17 is too low. I think at 29/30 bid you'd be able to buy.”

“I’d only consider selling in the 40s,” said the second trader source. Regardless of this, the price of the loan has slumped sharply. ICE quotes it down from 31.5 to 23 and then 21.5.

This is despite Accell having made a June coupon payment on its loan, according to the sources. One noted that making the payment was to avoid a default that would have removed the whitelist.

“Then KKR would need to have high conviction that anyone they approved to be added to the whitelist would not cause trouble by going against its own objectives through a restructuring."

The bid would not have caused any mark-to-market issues for CLOs. But neither would it make sense to bid for what would be a discounted obligation — CLOs buying a loan below 85 cents are required to mark it at either the current market value or the market value at purchase, which would impact deal metrics such as their over-collateralisation tests. That means it would be highly unusual for a CLO to buy and hold a loan below that level, and certainly not in the mid-teens.

"The rule is to value the asset at market price,” said another CLO source. “Some docs which are more rigid prohibit the purchase. It is interesting. Maybe the investor is a name approved in the list; maybe the platform buys and sells it internally to an opportunistic fund managed under the same manager umbrella. I never saw a CLO buying paper at those levels."

Them's the brakes

The first CLO PM suggested the bid might have come from a bank distressed desk looking to obtain information by buying €1m to get into the news flow, with a view to maybe trading the credit later — potentially in a restructuring scenario.

But a third loan trader source expressed doubt on this, saying: “I don't think there is any point in an info bid as it won't settle.”

Another factor influencing Accell's sharp price drop of late is that, in the Dutch press, Accell’s CEO Tjeerd Jegen said in an interview the recall of its cargo bikes, Babboe, over safety concerns would set the company back around €50m. Babboe made up around 5% of Accell’s turnover, Jegen said — around €75m. The CEO also put some numbers to Accell’s overstocking crisis: at FY 23, the company had 78 warehouses full of assembled bikes, versus its normal 25, resulting in an extra €20m of rental costs.

“We're expecting a conventional restructuring where KKR puts in money to maintain control,” said the second buyside trader. “The CEO is talking to the press with the KKR narrative and that's what's sending the loan down too. They made their interest payment but there's going to be a material haircut, substantially under 50.”

Another buysider 9fin spoke with agreed investors should expect a haircut of this order.

Sponsor KKR upped its shareholder loan to Accell by a further €50m in May to cover the costs of the recall of the bike brand. KKR already put in €150m of new money via an unsecured shareholder loan at the end of last year, on top of a €100m shareholder loan in May 2023.

Accell’s lenders in March mandated Houlihan Lokey and Milbank to advise them on talks with KKR, as we reported here. Some of the largest lenders into Accell’s TLB include Invesco, ICG, Angelo Gordon and Capital Four, according to 9fin’s data.