What does a hog have in common with a luxury car? Apparently they are equally attractive to securitization investors.
Harley-Davidson has priced its upsized, $850 million securitization of motorcycle loans, Harley-Davidson Motorcycle Trust 2014-1 at levels similar to recent securitizations of leases on cars manufactured by BWM and Mercedes.
Harley-Davidson's $126 million in class A-1 notes with a weighted average life (WAL) of 0.24 years priced at par to yield 0.2%; that is in line with the money market tranches of recent auto lease securitizations.
The $170 million class A-2A notes with a WAL of 1.24 years priced at 19 basis points over the eurodollar synthetic forward curve; the $252 million class A2B notes with a WAL of 1.24 years priced at one-month Libor plus 19 basis points; the $216 million of class A-3 notes with a WAL of 2.8 years priced at 23 basis points over interpolated swaps and the $85 million of class A-4 notes with a WAL of 3.64 years pricedat swaps plus 32 basis points.
All of the notes benefit from credit enhancement of 17.8%; Standard & Poor’s has assigned a preliminary A-1+’ rating to the money market tranche and AAA’ ratings to the longer-dated tranches.
RBS is the lead bookrunner.
The pool of loans backing the notes is comprised of 62,733 contracts with an average principal balance of $14,746, a weighted average interest rate of 10.8%, a weighted average original term of 73 months and a weighted average FICO score of 707.
According to S&P’s presale report, Harley-Davidson’s latest offering differs from its previous one, completed in 2013, in that it will issue only class A notes, whereas HDMOT 2013-1 also issued class B notes. As such, the latest transaction’s credit enhancement does not include subordination.
Among other differences, the percentage of loans for used motorcycles decreased to 33.6% in the latest deal from approximately 37.1% in the previous deal. The weighted average interest rate of 10.8% is also lower than 11.7% in the previous transaction.