If you've been perusing powersport industry financial reports for any length of time, then you may have noticed a trend over the past few years. As things continued taking a turn for the worse with Harley-Davidson's financial reports, there was still one segment of the company that consistently reported good results: Harley-Davidson Financial Services.
And now, Harley-Davidson announced that it has sold part of HDFS—for regular folks, that's the segment that handles financing for the purchase of Harley-Davidson motorcycles, as well as its loan portfolio. To explain this properly, I need to talk about how Harley divides its business into segments for the purposes of its financial reporting.
In its financial reports, there's the big umbrella organization, Harley-Davidson, Incorporated. Underneath that, there are three segments. They are as follows:
- Harley-Davidson Motor Company (HDMC), which handles all of its combustion motorcycles, as well as OEM parts and accessories
- Harley-Davidson Financial Services (HDFS), which handles loans and financing agreements with customers who choose to purchase their Harleys this way
- LiveWire, which handles reporting for both the LiveWire-branded EV motorcycles, and also the StaCyc-branded EV balance bikes for kids. Basically, all the company's EV products are grouped under the LiveWire heading for reporting purposes, whether they're LiveWires or not.
With me so far? Now, there've been rumbles that Harley was looking to sell some part of HDFS for some time. And since, as I said, it's consistently been the company's biggest moneymaker, even in the troubled times it's been going through lately, I'm sure I'm not the only one who wondered why you'd sell the one profitable thing you have.
The answer: You don't sell the whole thing; you sell partial equity instead.
And that's what Harley just announced that it's done, entering into a new 5-year partnership with financial firms KKR and Pacific Investment Management Co (PIMCO). Under the partnership terms, both KKR and PIMCO will receive 4.9% equity in HDFS, for a total of 9.8%. Harley-Davidson states plainly that it will retain control of HDFS for the time being, however.
Additionally, HDFS also reportedly sold over $5 billion of its existing retail loan portfolio to KKR and PIMCO. This, the company says in its most recent financial report, will effectively "reduce existing HDFS debt by over $4B netting ~$1B of cash." Furthermore, it says that it "expect[s KKR and PIMCO] to purchase ~two-thirds of future retail loans originated by HDFS for 5 years at a premium."
It then goes on to say that both KKR and PIMCO will pay a fixed 1.0% servicing fee for Prime loans and 2.5% for Sub-Prime loans for those future retail loans, over the entire lifetime of each loan. In other words, this arrangement will result in a future and ongoing additional revenue stream for HDFS, based on fees charged to its new partners for future loans that customers secure through HDFS.
The one thing I'd be a little concerned about if I had a retail loan that just got sold to HDFS' two new partners is very simple: The more people who have your sensitive financial and personal data, the more chances there are for future data breaches to affect your personal information.
This is in no way meant to cast any specific aspersions on any branch of Harley, nor on KKR or PIMCO; it's simply a numbers game. The more companies that have your personal information on file, the more potential there is for you to receive yet another notification that your data was leaked in some future hack or other type of data breach, years down the line. But, I suppose that's the nature of being a person in the world in 2025.
What will the Motor Company do with the money made?
Harley states that it plans to allocate $500M for share buybacks, which it had previously suspended due to its financial situation as of late. Furthermore, Harley-Davidson Inc's existing debt will be reduced by $450M. Around $1.25 billion, the OEM says, will be reinvested into further strengthening HDMC.
How will this strategy pan out? It's only been a day since the news broke at the time of writing, but shares in HOG already jumped 20% based solely on this news. It's hard to base anything on a single day's results, but it's clear that the stock market got excited about it.
What will it mean for customers and dealers? According to Harley, "Dealers and customers will continue to receive the strong service levels to which they are accustomed without any impact to wholesale loans, consumer credit cards or other offerings."
Intentions are just that, however: Intentions. Here's hoping they also end up being realities, as well. However this story pans out, we'll be sure to keep you updated.
