Harley Davidson 2012 Annual Report Download - page 84

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On April 13, 2012, the Company and HDFS entered into a new $675.0 million five-year credit facility to refinance and
replace a $675.0 million three-year credit facility that was due to mature in April 2013. The new five-year credit facility
matures in April 2017. The Company and HDFS also have a $675.0 million four-year credit facility which matures in April
2015. The new five-year credit facility and the four-year credit facility (together, the Global Credit Facilities) bear interest at
various variable interest rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings.
The Global Credit Facilities also require the Company to pay a fee based upon the average daily unused portion of the
aggregate commitments under the Global Credit Facilities. The Global Credit Facilities are committed facilities and primarily
used to support HDFS’ unsecured commercial paper program.
On September 14, 2012, the Company amended and restated its revolving asset-backed U.S. Conduit which provides for
a total aggregate commitment of $600.0 million. At December 31, 2012 and 2011, HDFS had no outstanding borrowings under
the U.S. Conduit. Refer to Note 7 for further discussion on the U.S. Conduit.
In August 2012, HDFS entered into an agreement with a Canadian bank-sponsored asset-backed commercial paper
conduit facility. Under the agreement, the Canadian Conduit is contractually committed, at HDFS' option, to purchase from
HDFS eligible Canadian retail motorcycle financial receivables for proceeds up to C$200 million. During 2012, HDFS
transferred $230.0 million of Canadian retail motorcycle finance receivables for proceeds of $201.3 million. Approximately
$37.7 million of the debt was classified as current at December 31, 2012. Refer to Note 7 for further discussion on the
Canadian Conduit.
During 2012, the Company issued $675.3 million of secured notes through one term asset-backed securitization
transaction. Additionally, during 2012, the Company issued $89.5 million of secured notes through the sale of notes that had
been previously retained as part of the December 2009, August 2011, and November 2011 term asset-backed securitization
transactions. These notes were sold at a premium, and at December 31, 2012, the unaccreted premium associated with these
notes was $1.2 million. During 2011, the Company issued $1.09 billion of secured notes through two term asset-backed
securitization transactions. Approximately $399.5 million and $640.3 million of the obligations under the secured notes were
classified as current at December 31, 2012 and 2011, respectively, based on the contractual maturities of the restricted finance
receivables. The term-asset backed securitization transactions are further discussed in Note 7.
In January 2012, HDFS issued $400.0 million of medium-term notes which mature in March 2017 and have an annual
interest rate of 2.70%. In September 2012, HDFS issued $600.0 million of medium-term notes which mature in September
2015 and have an annual interest rate of 1.15%. During 2011, HDFS issued $450.0 million of medium-term notes which mature
in March 2016 and have an annual interest rate of 3.875%. All of HDFS’ medium-term notes (collectively, the Notes) provide
for semi-annual interest payments and principal due at maturity.
During 2012 and 2011, HDFS repurchased an aggregate of $16.6 million and $49.9 million, respectively, of its $1.0
billion, 6.80% medium-term notes which mature in June 2018 As a result, HDFS recognized in financial services interest
expense $4.3 million and $9.6 million of loss on extinguishment of debt, respectively, which included unamortized discounts
and fees. During December 2012, the $400 million, 5.25% medium-term notes matured, and the principal and accrued interest
were paid in full. Unamortized discounts on the Notes reduced the balance by $2.2 million and $1.9 million at December 31,
2012 and 2011, respectively.
In February 2009 the Company issued $600.0 million of senior unsecured notes in an underwritten offering. The senior
unsecured notes provide for semi-annual interest payments and principal due at maturity. The senior unsecured notes mature in
February 2014 and have an annual interest rate of 15%. During the fourth quarter of 2010, the Company repurchased $297.0
million of the $600.0 million senior unsecured notes at a price of $380.8 million. As a result of the transaction, the Company
incurred a loss on debt extinguishment of $85.2 million which also included $1.4 million of capitalized debt issuance costs that
were written-off. The Company used cash on hand for the repurchase and the repurchased notes were canceled.
HDFS and the Company are subject to various operating and financial covenants related to the Global Credit Facilities
and various operating covenants under the Notes and the U.S. and Canadian asset-backed commercial paper conduit facilities.
The more significant covenants are described below.
The covenants limit the Company’s and HDFS’ ability to:
• incur certain additional indebtedness;
• assume or incur certain liens;
• participate in certain mergers, consolidations, liquidations or dissolutions; and
• purchase or hold margin stock.