Harley Davidson 2013 Annual Report Download - page 44

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44
Conduit also provides for an unused commitment fee based on the unused portion of the total aggregate commitment of $600.0
million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance
receivable collateral are applied to outstanding principal. Upon expiration of the U.S. Conduit, any outstanding principal will
continue to be reduced monthly through available collections. Unless earlier terminated or extended by mutual agreement of
HDFS and the lenders, as of December 31, 2013, the U.S. Conduit expires September 12, 2014.
Term Asset-Backed Securitization VIEs – For all of its term asset-backed securitization transactions, HDFS transferred
U.S. retail motorcycle finance receivables to separate VIEs, which in turn issued secured notes, with various maturities and
interest rates to investors. All of the notes held by the VIEs are secured by future collections of the purchased U.S. retail
motorcycle finance receivables. The U.S. retail motorcycle finance receivables included in the term asset-backed securitization
transactions are not available to pay other obligations or claims of HDFS’ creditors until the associated debt and other
obligations are satisfied. Cash and cash equivalent balances held by the VIEs are used only to support the securitizations. There
is no amortization schedule for the secured notes; however, the debt is reduced monthly as available collections on the related
retail motorcycle finance receivables are applied to outstanding principal. The secured notes’ contractual lives have various
maturities ranging from 2014 to 2020.
During the second quarter of 2013, the Company issued $650.0 million of secured notes through one term asset-backed
securitization transaction. During the third quarter of 2012, the Company issued $675.3 million of secured notes through one
term asset-backed securitization transaction. Additionally, during the second quarter of 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, 2013
and 2012, the unaccreted premium associated with these notes was $0.5 million and $1.2 million, respectively.
Intercompany Borrowings – Prior to the first quarter of 2013, HDFS had a revolving credit line with the Company
whereby HDFS could have borrowed up to $210.0 million from the Company at a market interest rate. As of December 31,
2012 and 2011, HDFS had no outstanding borrowings owed to the Company under this agreement. This agreement was
terminated during the first quarter of 2013.
During 2013, HDFS and the Company entered into the following term loan agreements under which HDFS borrowed
from the Company (in thousands):
Principal Amount Issue Date Maturity Date
$300,000 March 2013 April 2013 *
$100,000 September 2013 November 2013*
$300,000 June 2013 April 2014
$150,000 September 2013 April 2014
* This loan was repaid on or before the Maturity date.
During the second quarter of 2012, HDFS and the Company entered into a $200.0 million Term Loan Agreement which
had a maturity date of August 2012 or upon earlier demand by the Company. HDFS repaid the $200.0 million Term Loan
Agreement in July 2012. During the fourth quarter of 2012, HDFS and the Company entered into a $400.0 million Term Loan
Agreement which had a maturity date of January 2013 or upon earlier demand by the Company. The loan was repaid in January
2013.
The term loans provide for monthly interest based on the prevailing commercial paper rates and principal due at maturity
or upon demand by the Company. The term loan balances and related interest are eliminated in the Company’s consolidated
financial statements.
Support Agreement - The Company has a support agreement with HDFS whereby, if required, the Company agrees to
provide HDFS with financial support in order to maintain HDFS’ fixed-charge coverage at 1.25 and minimum net worth of
$40.0 million. Support may be provided at the Company’s option as capital contributions or loans. Accordingly, certain debt
covenants may restrict the Company’s ability to withdraw funds from HDFS outside the normal course of business. No amount
has ever been provided to HDFS under the support agreement.
Operating and Financial Covenants – 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: