Revenue from motorcycle loans will serve as collateral for $552.3 million in securitization bonds, to be issued from the Harley-Davidson Motorcycle Trust 2023-B.
Harley Davidson Credit Corp., the deal's sponsor, has been sponsoring such deals since 1994, according to ratings analysts from Moody's Investors Service. Eaglemark Savings Bank originated the loans in the transaction, most of which—63.9%—are new, Moody's said.
HMDOT 2023-B will issue notes from four classes of notes, all of which have total initial hard credit enhancement of 5.00%, the rating agency said. Moody's noted that J.P. Morgan Securities, Barclays Capital and MUFG Securities Americas are lead underwriters on the deal.
S&P Global Ratings, which will also rate the notes, says the notes have 9.8% in available credit support for the class A notes, based on stressed, break-even cash flow scenarios. Under a moderate, 'BBB' stress scenario, the preliminary ratings on the class A notes will be within the credit stability limits.
Moody's notes that credit enhancement to the class A notes at closing includes a non-declining overcollateralization of 4.75% of the initial adjusted pool balance. The deal also has a non-declining reserve fund of 0.25% of the initial adjusted pool balance.
S&P set its expected cumulative net loss on the HMDOT 2023-B at 1.70%, up from 1.45% for series 2022-A, which was the last series rated by S&P Global Ratings. The rating agency noted that the deal has a yield supplement overcollateralization amount (YSOA) of 10.0%, up from 8.50%. The initial YSOA as a percentage of the initial adjusted pool balance comes to 4.24%, up from 3.40%.
Moody's did point out a couple of areas that pose potential credit challenges to the deal. One of these factors is a weakened managed portfolio, where receivables originated between late 2021 and Q1 2023 are displaying weaker performance compared to previous vintages, Moody's said.
Moody's expects to rate the A1 notes 'P-1'; and 'Aaa' to the A2 through A4. S&P says it will assign ratings of 'A-1+' to the A1 notes; and 'AAA' to the A2 through A4 notes.
