Harley Davidson 2013 Annual Report Download - page 83

83
During 2013, the Company issued $650.0 million of secured notes through one term asset-backed securitization
transaction. 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, 2013 and 2012, the unaccreted premium associated with
these notes was $0.5 million and $1.2 million, respectively. Approximately $334.6 million and $399.5 million of the obligations
under the secured notes were classified as current at December 31, 2013 and 2012, respectively, based on the contractual
maturities of the restricted finance receivables. The term-asset backed securitization transactions are further discussed in Note
7.
No medium-term notes were issued in 2013. 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%. All of HDFS’ medium-term notes
(collectively, the Notes) provide for semi-annual interest payments and principal due at maturity. Unamortized discounts on the
Notes reduced the balance by $1.5 million and $2.2 million at December 31, 2013 and 2012, respectively.
During 2013, 2012, and 2011, HDFS repurchased an aggregate of $23.0 million, $16.6 million, and $49.9 million
respectively, of its 6.80% medium-term notes which mature in June 2018. As a result, HDFS recognized in financial services
interest expense $4.9 million, $4.3 million, and $9.6 million of loss on extinguishment of debt, respectively, which included
unamortized discounts and fees. During December 2012, $400.0 million of the 5.25% medium-term notes matured, and the
principal and accrued interest were paid in full.
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.
Under the financial covenants of the Global Credit Facilities, the consolidated debt to equity ratio of HDFS cannot
exceed 10.0 to 1.0. In addition, the Company must maintain a minimum interest coverage ratio of at least 2.25 to 1.0 for each
fiscal quarter through June 2013 and at least 2.5 to 1.0 for each fiscal quarter thereafter. No financial covenants are required
under the Notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.
At December 31, 2013 and 2012, HDFS and the Company remained in compliance with all of these covenants.