Harley-Davidson has been undergoing a very precarious past couple of months during the first two quarters of the year. Among all the motorcycle companies that were battered by the effects of the global pandemic, Harley-Davidson was among the companies that took a really hit hard. It didn’t help that they weren’t in the healthiest of positions in the first place. A change in leadership followed by a change of strategic direction, and changes in production were later on announced in the hopes that it would be enough to keep the Screamin’ Eagle manufacturer afloat.
Now, Harley-Davidson is now pursuing other actions to secure additional liquidity in response to the COVID-19 pandemic. They filed an 8-K document before the United States Securities and Exchange Commission (SEC) earlier this month which is a document that is used when a publicly-traded company makes big business moves between its regular quarterly and annual reports. This serves a notice to its shareholders if the company was having a change of leadership, a drastic change in manufacturing plans, or if it was shuffling a lot of money around. Harley-Davidson has already done these three things with a newly hired CEO last month, Jochen Zeitz, and a revised production plan. However, this new 8-K form filed was intended to inform its shareholders about their now plans of restructuring their liquidity and move money.
They formally reported that:
- In May, the Company completed two on-balance sheet asset-backed securitization transactions: one for $500 million and another for $750 million.
- In May, the Company issued €650 million of medium-term notes that mature in May 2023.
- In May, $450 million of floating-rate medium-term notes matured and were paid in full.
- Completion of the $500 million asset-backed securitization transaction triggered the early termination on May 18, 2020, of the Company’s $195.0 million 364-day credit facility which was due to mature in August 2020. On June 1, 2020, the Company entered into a new $350.0 million 364-day credit facility and committed to drawing $150.0 million under the facility.
In a nutshell, since it has been quite difficult for companies to borrow money, Harley-Davidson found it best to file an 8-K document to explain what was going on. They were able to borrow money, pay it back, and now need to borrow more money to keep their liquidity healthy. This was necessary for the current conditions of the capital markets that have presented challenges for many issuers. Harley-Davidson would still want to make use of the capital markets to inject more liquidity into the company. Something that is not unusual for big businesses to go through to restructure their finances without causing all sorts of alarm with the shareholders. After all, with its new leadership under Jochen Zeitz, he’s had more than enough experience in the past of reviving companies to a much healthier state than when he started.
The money shuffle shouldn’t be seen as something alarming, especially under its new leadership. Rather, it should be seen as a move that was necessitated by certain circumstances just to ensure that one of the oldest true American companies and motorcycle brands stays with us for generations to come.