Harley-Davidson (HOG+0.2%) is offering $605M of bonds backed by loans to buyers of its motorcycles. The debt deal comes as the Sturgis bike rally in South Dakota is expected to include 700,000 people, the biggest in years.
The 10-day annual rally, which begins Friday, has incited COVID fears, but bikers and Republican governor Kristi Noem have embraced the event. COVID-19 cases in South Dakota have roughly halved since the event last year when 460,000 bikers showed up.
Harley-Davidson's bond deal packages 30,000 motorcycle loans into 4 tranches, with borrowers paying an average interest rate of 7.36% on an average debt of about $20,000.
The company's AAA-rated bonds are expected to offer a modest premium in the range of 12 to 14 basis points above a fixed-rate benchmark.
Spreads have significantly fallen this year on consumer asset-based bonds, even as their volume has increased 56.4% Y/Y. Harley CFO Gina Goetter said that the company expects low losses on its motorcycle loans due to an "influx of stimulus funding and improved economic conditions."
Harley-Davidson beat earnings in its second quarter, but the stock fell as the company forecasts lower future operating margins.