EXPERIENCEBUSINESS - Harley-Davidson

HARLEY- DAVIDSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. HARLEY-DAVIDSON
FINANCIAL SERVICES, INC. (CONTINUED)
The allowance for credit losses pertaining to revolving
charge receivables sold during 2000 was reversed and included
in the calculation of gain on the sale.
During 2000, 1999 and 1998, the Company sold $724.0
million, $575.0 million and $450.0 million, respectively, of its
retail motorcycle installment loans through securitization
transactions. The Company retains servicing rights and has
limited recourse in the sale transactions. In conjunction with
these sales, HDFS has recorded an asset of $100.4 million representing
its retained securitization interests. The Company
also receives annual servicing fees approximating one percent
of the outstanding balance. HDFS serviced with limited
recourse $1.1 billion and $.8 billion of retail installment loans
as of December 31, 2000 and 1999, respectively.
The value of the retained interest is subject to credit, prepayment,
and interest rate risks on the $1.1 billion of securitized
retail installment loans. Key assumptions used in measuring
the fair value of the retained interests as of December
31, 2000, which were consistent with those used during the
year, were as follows:
Prepayment speed (Single Monthly Mortality) 2.50%
Weighted-average life (in years) 1.93
Expected cumulative net credit loss rate 1.89%
Residual cash flows discount rate 12.00%
The change in the current fair value of the retained interests,
relative to an immediate 10 percent and 20 percent
adverse or favorable change in the key assumptions, would
not be material to the Company’s financial statements.
As of December 31, 2000, the $1.2 billion of managed
motorcycle retail installment loans, of which $1.1 billion are
securitized, includes approximately $19.4 million which were
60 days or more past due. Approximately $8.7 million of net
credit losses have been recognized on these loans during the
year ended December 31, 2000.
Loans 60 days or more past due are based on end of
period total managed motorcycle loans, excluding those loans
reclassified as repossessed inventory. Net credit losses are
charge-offs net of recoveries and are based on managed
motorcycle loans outstanding.
HDFS’ debt as of December 31, consisted of the following:
(In thousands)
2000 1999
Commercial paper $346,703 $373,212
Revolving credit facility 67,806 57,951
Senior subordinated notes 30,000 30,000
Total finance debt $444,509 $461,163
HDFS may issue commercial paper of up to $700 million.
Maturities may range up to 270 days from the issuance
date. Outstanding commercial paper may not exceed the liquidity
support provided by the unused portion of the Credit
Facilities noted below. The weighted average interest rate on
outstanding commercial paper balances was 6.57% and
6.01% at December 31, 2000 and 1999, respectively.
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