S&P Assigns Harley-Davidson Eaglemark AAA, BBB Ratings
29 July 1997
S&P Assigns Harley-Davidson Eaglemark AAA, BBB Ratings
NEW YORK, July 29 -- Standard & Poor's today has assigned its
triple-`A' rating to the class A-1 and class A-2 Harley-Davidson Eaglemark
Motorcycle Trust 1997-2's motorcycle contract-backed notes and its triple-`B'
rating to the Harley-Davidson Eaglemark Trust 1997-2's motorcycle contract-
backed certificates. Approximately 25% of the total issue amount will be pre-
funded at closing with all subsequent transfers of contracts into the trust to
occur no later than three months from the closing date.
The ratings are based on the following credit support:
-- For the triple-`A' rated notes: 6.50% subordination of the
certificates, a shared spread account of 2.50% of the outstanding balance, and
excess spread. Both the A-1 and A-2 classes of notes will rank equally in
priority of interest payments from available funds.
-- For the triple-`B' rated certificates: the shared 2.50% reserve
account, a dedicated, non-amortizing certificate reserve amount of 0.45% of
the total sale amount, or $450,000, and excess spread. The certificate reserve
amount will be available exclusively to the certificate holders to cover
interest and principal shortfalls on the certificates. The certificate reserve
amount will be fully funded at closing.
In addition, the transaction also benefits from a fast-pay, sequential
structure that allocates principal to each successive class until its
outstanding balance is reduced to zero. For the senior classes, the effect is
to reduce average life and the overall exposure period. For the subordinated
certificate class, the result is a greater likelihood that both the dedicated
reserve amount as well as any remaining amounts in the shared reserve account
will be available exclusively to the certificate holders in the latter stages
of the transaction.
The 1997-2 transaction is the second publicly rated securitization by
Eaglemark Inc., an indirect wholly owned subsidiary of Harley-Davidson
Inc.(single-`A'-minus/stable). Eaglemark Inc. is the seller and servicer in
the transaction and has been providing both wholesale and retail financing to
dealers and customers of Harley-Davidson motorcycles since 1993.
Eaglemark's portfolio of motorcycle sales contracts has grown rapidly over
the last three years, as the company continues to boost its presence within
the market for Harley-Davidson financing. The portfolio increased to
$367.7 million as of May 31, 1997 from $304.7 million at fiscal year-end 1996
and $244.1 million at May 31, 1996.
Delinquency and loss statistics reflect the gradual seasoning of the
company's inventory of contracts as total over 30 day delinquencies grew form
2.20% at fiscal year-end 1994 to 4.30% at fiscal year-end 1996, 3.37% at
March 31, 1997, and 3.17% at May 31, 1997. Typically, delinquencies increase
in the fourth quarter, due to seasonal factors, and return to lower levels
during the spring as a result of improved recovery efforts.
Net losses grew from 47 basis points for the 12 month 1995 period to
54 basis points for the same period in 1996 and up to 93 basis points, on an
annualized basis, for the first five months of 1997. The rise in annualized
losses is attributable to increased liquidations as the company's inventory of
repossessed motorcycles fell by 22% between February 1997 and May 1997.
The securitized pool of contracts represents new(62%) and used(38%)
motorcycle sales contracts with a weighted average percentage rate (APR) of
13.22%, a weighted average remaining term of 65 months, and limited seasoning
of under two months. The contracts represent a geographically diverse obligor
base with no concentrations above 10% of the pool balance.
Eaglemark benefits from strong underwriting and servicing operations, an
experienced management team, and favorable resale values for Harley-Davidson
motorcycles. Overall, Standard and Poor's believes the 1997-2 pool will lose
approximately 2.5% of the initial collateral balance. Consequently, credit
enhancement has been structured to sustain losses at a multiple of expected
figures. -- CreditWire
SOURCE Standard & Poor's CreditWire
