Harley-Davidson confirms strategic partnership with KKR and PIMCO

Harley-Davidson (HOG) announced that HDFS has entered into a long-term strategic partnership with KKR (KKR) and PIMCO. This partnership transforms HDFS into a capital-light financing business through the sale of existing and future retail loans while maintaining its strategic value to Harley-Davidson, its dealers, customers and investors. The sale of more than $5 billion of existing retail loan receivables is valued at a premium to par. Under the terms of the agreement, HDFS will also sell 4.9% common equity interests to investment vehicles managed by KKR and PIMCO at an implied valuation of ~1.75x price to post-transaction book value. Harley-Davidson will retain control of HDFS, which will continue to originate and service existing and new consumer loans. The Company expects HDFS operating income to grow back toward pre-transaction levels over time. The Company plans to use the approximately $1.25 billion of cash unlocked through the transaction to reinvest to support demand-driven investments, reduce $450 million of HDI debt and return approximately $500 million to shareholders. KKR’s investment comes from KKR-managed credit funds and accounts via the firm’s Asset-Based Finance strategy. PIMCO’s investment comes from funds and accounts focused on PIMCO’s private strategies.