Fitch Expects to Rate Harley-Davidson Financial’s Medium-Term Notes ‘A-‘

CHICAGO, IL – September 19, 2012 – (Motor Sports Newswire) – Fitch Ratings expects to assign a rating of ‘A-‘ to Harley-Davidson Financial Services, Inc.’s (HDFS) expected $600 million three-year medium-term note issuance. The proceeds of the debt issuance are expected to be used for general corporate purposes. HDFS’s long- and short-term Issuer Default Ratings (IDRs) are not expected to be affected by the issuance of these debt securities as the company’s pro forma leverage metrics are consistent with similarly rated captive finance peers. HDFS is the captive finance subsidiary of Harley-Davidson, Inc. (HOG), a manufacturer of motorcycles.

The IDRs and senior debt ratings for HDFS are linked to those of its parent, as Fitch believes HDFS is core to HOG’s overall franchise. HDFS’s ratings reflect its close operating relationship with HOG, which is governed by a support agreement in favour of debt holders under which HOG must maintain HDFS’s fixed charge coverage ratio at 1.25 times (x) and minimum net worth of $40 million.

On July 20, 2012, Fitch upgraded the long-term IDRs of HOG and its subsidiaries, HDFS and Harley-Davidson Funding Corp. (HDFC) to ‘A-‘ from ‘BBB+’ with a Stable Rating Outlook. The upgrades reflect the motorcycle manufacturer’s leading position in the U.S. heavyweight motorcycle segment, robust cash liquidity position, high EBITDA margins and low operating company leverage.

RATING DRIVERS AND SENSITIVITES

Fitch believes positive rating momentum for HDFS is limited by HOG’s credit profile, as HDFS ratings and Outlook are linked to that of its parent. Fitch cannot envision a scenario where the captive would be rated higher than its parent.

Conversely, negative rating action could be driven by a change in the perceived relationship between HOG and HDFS. Additionally, a change in profitability leading to operating losses, substantial decline in portfolio asset quality, material change in balance sheet leverage over and above historical levels between 5x and 7x, and/or deterioration in the company’s liquidity profile could also yield negative rating action.

Fitch expects to assign the following rating:

Harley-Davidson Financial Services, Inc.

  • Senior unsecured debt at ‘A-‘.

The Rating Outlook is Stable.

Additional information is available at ‘www.fitchratings.com‘. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

  • ‘Global Financial Institutions Rating Criteria’ (Aug. 15, 2012);
  • ‘Rating FI Subsidiaries and Holding Companies’ (July 9, 2012);
  • ‘Finance and Leasing Companies Criteria’ (Dec. 12, 2011).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Finance and Leasing Companies Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=659834

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