Harley-Davidson Inc. has received $500 million in an advance loan from its lenders, according to a document filed by the company with the U.S. Securities & Exchange Commission on Friday.
The Milwaukee-based motorcycle manufacturer's subsidiaries Harley-Davidson Warehouse Funding Corp. and Harley-Davidson Credit Corp. entered into a loan and servicing agreement with a group of lenders, including JPMorgan Chase Bank NA.
Repayment of the loan will be due March 31, 2009.
Harley (ticker symbol HOG) has $400 million in medium term notes (MTN) maturing today, according to a research note written by UBS analyst Robert Farley today.
"On the back of this announcement it appears the unsecured debt markets may have been too difficult for Harley to access, with this arrangement providing additional time for HOG to complete a deal," Farley wrote.
The company's Harley-Davidson Financial Services Inc. (HDFS) unit continues to carry some bad debt, Farley wrote.
"It is estimated HDFS will require $1.5 billion to continue funding its loan operations for 2009. HOG is working thru its options for securing this liquidity, but as this transaction may indicate, conditions in the unsecured debt market remain difficult, and this deal only provides $500 millon thru March 31. Recent checks show that HDFS has not pared back its lending to subprime borrowers (25 to 30 percent of loan portfolio)," Farley wrote.
The loan comes on the heels of Fitch Ratings downgrading its rating outlook for Harley to "negative" in November.
"The rating action is driven by HDFS' declining operating performance, reduced financial flexibility, and deteriorating asset quality combined with declining sales and weaker margins at HOG. The negative outlook reflects the current capital market and economic environment which could continue to pressure HDFS' ability to originate and fund as it has historically and Fitch's concern of further weakening asset performance. The negative outlook also reflects an expectation of lower sales and operating margins in 2009 for HOG. Minor concerns contributing to the negative outlook include the possibility of debt issuance at HOG to support HDFS and the possibility of cash outflows related to share repurchases, increased pension contributions, and additional restructuring actions next year in addition to the material amount of cash used for dividend payments. Fitch continues to view HDFS as an integral part of HOG which provides necessary financing for the purchase of HOG cycles," Fitch wrote.
"HOG's sales and operating margins will remain challenged in 2009 as discretionary spending will continue to be pressured by the financial crises and global economic slowdown. Fitch expects that HOG will have to decrease shipments and restructure its operations in 2009 following similar actions this year. For the first nine months of 2008, total Harley-Davidson brand motorcycles shipments decreased 22,515 units or 9.0% to 226,898 bikes, while retail sales decreased 16,948 units or 6.0 percent to 267,014 units, indicating seasonally adjusted dealer inventories have decreased," Fitch wrote.
Meanwhile, New York-based Sparta Commercial Services Inc. announced today that it has completed its first commercial fleet leasing transaction with a major Harley-Davidson dealer, providing a credit line of $460,000 under its new program.
According to the company, the response to the recent launch of its new Commercial Fleet Leasing Program exclusively for Harley-Davidson dealers has exceeded the company's original projected expectations.
Under terms of the program, Sparta buys fleets of Harley motorcycles and leases them back to the dealers, who make them available to be leased by customers. Sparta chief operating officer Dick Trotter told BizTimes Milwaukee that due to the recession and tight credit markets, leasing has become increasingly popular among Harley enthusiasts. Some customers sign five-year leases, he said.
The leasing program enables dealers avoid having to buy the motorcycles, thereby freeing up their cash flow, Trotter said.
With more than 800 retail Harley-Davidson dealers throughout the United States, Sparta anticipates entering into similar commercial fleet leasing agreements with a considerable number of them in the coming months.
Anthony Havens, chief executive officer of Sparta, said, "While credit has become more restrictive due to the changes in the financial markets, Sparta is pleased to move forward with this new program to assist our dealers."

Northern Trust Corp. announced today it will eliminate 450 jobs in 2009.
The Chicago-based company, which operates an office in Milwaukee, said it expects to record a pre-tax charge in the fourth quarter of 2008 of approximately $20 million to $25 million (5 to 7 cents per share) associated with severance and benefits relating to the elimination of the jobs and other costs.
The actions are expected to generate approximately $50 million to $60 million in annualized pre-tax savings, the company said.
Northern Trust said the layoffs are needed to improve its profitability under "difficult economic conditions. The layoffs will begin after the first of the year, and the company said it will use attrition whenever possible.
"The macroeconomic environment has been extraordinarily difficult and has impacted all segments of the global economy. Our decisions, while difficult, will further enhance Northern Trust's position amid challenging conditions, while maintaining our focus on clients and those activities in which we have significant competitive advantage and continue to see opportunities for growth," said Frederick Waddell, chief executive officer of Northern Trust.
The company did not specify where the job cuts will happen.
Today's announcement came weeks after Northern Trust disclosed that the U.S. Treasury will spend up to $1.5 billion to buy senior preferred and related warrants from the company under the federal Troubled Asset Relief Program (TARP) as part of the $700 billion federal bailout plan.
Layoffs are mounting in the distressed banking industry. Citigroup Inc., the parent company of CitiBank, recently announced it will eliminate 52,000 jobs. Bank of America Corp. plans to lay off 35,000 after acquiring Merrill Lynch.

Orion Energy Systems Inc., a Manitowoc provider of energy management systems to the commercial and industrial sectors, today announced that its board of directors has authorized the repurchase of up to an additional $10 million of its outstanding common stock.
The action supplements the $20 million share repurchase authorization approved in July. That plan has been virtually fully utilized, the company said. Through Dec. 12, the company had repurchased 4.6 million shares of common stock under its original repurchase program.
Purchases by the company under the new program may be made from time to time in the open market, privately negotiated transactions, accelerated stock repurchase programs or otherwise, as determined by the company's management.

Several prominent American retailers will participate in an inaugural Free Shipping Day promotion for online shoppers on Thursday, Dec. 18.
With the promotion, the retailers will offer free shipping for items ordered online on Thursday, the last day in which delivery by Christmas Eve will be guaranteed.
The retailers participating in the promotion include Menomonee Falls-based Kohl's Corp., Bloomingdale's, Circuit City, J.C. Penney, Crate & Barrel, Eddie Bauer, Kmart, Macy's, Nordstrom, Sears, Toys R Us, Target and eBags.
Retailers have embraced the idea, which was developed by Luke Knowles, founder of FreeShipping.org (www.freeshipping.org), a Fort Collins, Colo.-based, one-stop destination for consumers to find online retailers that offer free shipping deals.
"Simply put, Free Shipping Day is the last chance for many people to buy gifts and get them delivered to the intended recipient in a nick of time," Knowles said. "We are a nation of procrastinators, so I think that Free Shipping Day will become a popular annual event.
According to Knowles, online shopping historically has declined dramatically after December 12.
"Free Shipping Day has the potential to increase pre-Christmas online sales by hundreds of millions of dollars over the next few years," Knowles said.

U.S. Attorney Steven Biskupic will join Michael Best & Friedrich LLP in Milwaukee as a partner in the law firm's litigation practice group when he resigns from his current job, the firm announced today.
Biskupic recently announced his plans to resign from the U.S. Attorney's Office after Democrat Barack Obama won the Nov. 4 election. Biskupic had been appointed to the post by President George W. Bush in May 2002.
Biskupic will join Michael Best & Friedrich in February. In his private practice, he will work to protect the rights of businesses involved in civil and regulatory business matters and provide proactive compliance advice.
"Michael Best has a terrific reputation in the business community, and its diverse areas of practice will allow me to work with businesses facing a broad spectrum of legal challenges," Biskupic said. "I'm also thrilled to have an opportunity to work with the firm’s office in Chicago where I grew up and still have many family members and friends in the legal community."
"Following his distinguished career in public service, Steve Biskupic will bring a wealth of experience and knowledge to benefit our clients," said Scott Beightol, chair of Michael Best & Friedrich's management committee. "Steve's skills are particularly valuable given the increasingly challenging regulatory landscape for businesses."

Local stocks in the BizTimes Stock Index defied the broader market and moved mostly upward in early morning trading today. Local gainers far outnumbered decliners, even though the Dow Jones Industrials Average was in negative territory this morning. The largest local gainers this morning included Weyco Group Inc. (up $2.89 to $32.87), Badger Meter Inc. (up $2.24 to $30.34) and A.O. Smith Corp. (up $1.33 to $28.60). The largest local decliners were Strattec Security Corp. (down $1.97 to $15.03) and Johnson Controls Inc. (down 45 cents to $18.22). Today's gains followed Friday's session, in which the BizTimes Stock Index gained 1.97 points to close at 88.95.

The Kalahari Resort & Convention Center in the Wisconsin Dells has added a $20 million indoor amusement facility. The 110,000-square-foot theme park features a six-story Ferris wheel, a 28-foot-wide carousel, an elevated go-cart track and miniature golf. Also included are 24 lanes of bowling, golf simulators, climbing walls, laser tag and a 24-foot-high ropes course. Read more in BizTimes Milwaukee's daily roundup of headlines from newspapers across the state at www.biztimes.com/#news.

Public and private sector organizations with a stake in the automotive industry in southeastern Wisconsin are calling for the federal bailout of the Big Three in Detroit. Read more in the latest edition of the BizTimes Manufacturing Weekly bulletin.

The Commercial Association of Realtors Wisconsin (CARW) recently held its holiday party at the Milwaukee Center in downtown Milwaukee. To view a photographic slideshow of the event, visit the latest edition of BizTimes Around Town.

A new book written by the principals of 800-CEO-Read captures the best of the best business books around. Read more in today's Milwaukee Biz Blog by Steve Jagler, executive editor of BizTimes Milwaukee.

CEOHarley-Davidson Inc. announced today that president and chief executive officer James Ziemer has informed the company's board of directors that he intends to retire in 2009, capping a 40-year career with the Milwaukee-based firm.
The board has formed a search committee to review both internal and external candidates to succeed Ziemer, who will remain in his current role until a new CEO is in place.
"Jim Ziemer has dedicated his entire professional career to Harley-Davidson and has been a great advocate for the company," said Jeffrey Bleustein, board chairman. "All of us who have worked with Jim throughout the years have benefited from his leadership, his selfless commitment to the company and his contributions to making the brand one of the most admired and successful brands in the world. As an avid and lifelong motorcyclist, Jim also exemplifies the great legacy and spirit of Harley-Davidson."
Ziemer is a native Milwaukeean who grew up in the neighborhood next to Harley-Davidson's original Milwaukee factory location on the city's west side. He started with the company in 1969 as a freight elevator operator while attending the University of Wisconsin-Milwaukee.
He has been president and CEO since 2005.
"Working at Harley-Davidson has been an honor and privilege and has fulfilled a life-long dream for me," Ziemer said. "I am extremely proud of what our outstanding team of employees and dealers has accomplished together. There is always new and exciting work to be done on Harley-Davidson's epic journey, and I have great confidence that the powerful combination of our employees, customers and dealers around the world and their passion will continue to fuel the strength of the brand. I am delighted to be able to spend more time with my family and am enthusiastic about the Company's tremendous opportunities and its prospects for success in the years to come."
Harley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor Co. (HDMC), Buell Motorcycle Company (Buell), MV Agusta and Harley-Davidson Financial Services (HDFS) Inc.