TEXT-S&P: Harley-Davidson ratings unchanged after merger
Dec 14 - Standard & Poor's Ratings Services said today that its A-2 short-term rating on Harley-Davidson Inc.'s (HDI) $1.35 commercial paper program is unaffected by the company's plan to merge Harley-Davidson Funding Corp. into Harley-Davidson Financial Services Inc. (HDFS), effective Jan. 1, 2013. As a result of the merger and dissolution of Harley-Davidson Funding Corp. into HDFS, HDFS will be the new issuer of the commercial paper program. HDI intends to use the proceeds for general corporate purposes. All other ratings on HDI, including the 'BBB+' corporate credit rating, remain unchanged. The long-term rating outlook is positive. HDI's $1.35 billion revolving credit facilities, of which HDFS is a borrower, back up the company's proposed commercial paper program. Harley-Davidson Credit Corp. will provide an upstream guarantee with respect to the principal and interest, and HDFS has a support agreement with HDI whereby HDI can provide certain financial support in order to maintain certain financial covenants at HDFS. Our 'BBB+' corporate credit rating on HDI reflects our assessment of the company's business risk profile as "satisfactory" and our assessment of its financial risk profile as "modest," according to our criteria. Our assessment of HDI's business risk profile as satisfactory reflects the company's strong brand and 56.5% market share of the U.S. heavyweight (651 cc-plus) motorcycle market in 2011, as well as our expectation for continued improvement in operating trends. Susceptibility to supply-chain disruptions, changes in discretionary spending patterns, and a lack of diversity somewhat offset the strengths. Our modest financial risk profile is based on credit measures that remain strong for the rating, including adjusted debt to EBITDA that we expect to remain below 1x. Management's commitment to maintaining the equivalent of a year of liquidity on the balance sheet also supports our assessment of HDI's financial risk profile as modest. Furthermore, while HDI still relies on the securitization markets to fund receivables at the retail level, we believe diversity of funding has lessened this dependency.
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