Harley-Davidson Financial Services has issued a $580.2 million securitization, its second ABS issuance after a three-year hiatus, according to a presale report from Moody’s Investors Service. The deal is expected to close Jan. 29.
The securitization’s key credit strengths include the collateral pool’s “high credit quality, financial strength and experience as a sponsor and servicer, as well as build-up of enhancement as the pool amortizes,” according to the report.
The issuance consists of prime motorcycle loans with a weighted average APR of 7.14%, the third-lowest rate in all of Harley’s securitizations. The deal’s weighted average FICO was 758, on par with the credit scores in Harley’s 2019 and 2016 transactions, and higher than the 711 average FICO in the captive’s 2015 issurance. The weighted average loan term is 71 months and is “on the longer side than that of most deals from other issuers,” the report said.
One weakness of the transaction is a decline in resale values of Harley-Davidson motorcycles in the past five years, driven by a rise of less expensive models from competitors and less demand from consumers. Additionally, the portfolio performance has weakened in recent years; the net loss was 1.37% for the nine months ended Sept. 30, 2019, up from 1.16% in the prior-year period.
The issuance also has a higher concentration of used motorcycles compared with HDFS’s previous two deals, but a lower ratio than in its remaining transactions. Used motorcycles comprise 31% of the pool, compared with 30% in 2019. Used vehicles accounted for 33% to 39% of the assets in HDFS’s securitizations prior to 2016.