HOG sells $5B in HDFS loans to asset management firms

KKR & Co. and Pacific Investment Management Co. have each agreed to purchase a stake in Harley-Davidson Financial Services and buy more than $5 billion in existing loan receivables, Harley-Davidson announced today. Asset management firms New York City-based KKR and Newport Beach, Calif.-based Pacific Investment Management Co. (PIMCO) will each purchase a 4.9% common equity interest stake in HDFS along with existing loans at a premium-to-book value and about two-thirds of loans originated annually for five years, according to HOG’s second-quarter earnings presentation today. The transaction is expected to close in the second half of 2025 and turn HDFS into a “capital-light financing business,” Jonathan Root , chief financial officer, said during today’s earnings call. [caption id="attachment_58353685" align="aligncenter" width="1024"] (Courtesy/Bloomberg)[/caption] HDFS’ post-transaction equity is valued by the asset management firms at about $500 million, or 1.75 times higher than post-transaction book value, Chief Executive Jochen Zeitz said on the call. “With this transaction, we are reducing our overall leverage and the perceived risk highlighted every time the business environment deteriorates, freeing up significant equity on the balance sheet and creating a long-term stable funding mechanism,” he said. “All of which we believe will contribute to greater funding flexibility and lower borrowing costs.” The move is expected to reduce HDFS’ debt by more than $4 billion, net $1 billion in cash and fund a $1.3 billion distribution to Harley-Davidson, according to the presentation. The firms will pay a fixed servicing fee to HDFS over the life of the loans — 1% for prime loans and 2.5% for subprime loans. The deal “provides a significant stable source of funding for Harley’s finance unit, which will reduce its need to tap the public debt markets going forward,” Stephen Brown , senior director at Fitch Ratings , said in a statement provided to Auto Finance News . HOG will retain control of HDFS , with the firms “providing improved underwriting, pricing and funding capabilities,” according to the presentation. The move comes as: Harley-Davidson Motor Co.’s revenue decreased 23% year over year in Q2 to $1 billion; Global motorcycle shipments fell 28% YoY to 35,800 units; Global dealer inventory shrunk 28% YoY to 49,000 units; Global retail sales declined 15% YoY to 42,300 units; North American retail motorcycle sales fell 17% YoY to 28,900 units; and Tariff costs amounted to about $13 million in Q2 and $17 million in the first half of 2025. “Harley’s second quarter performance continued to show the significant challenges facing the powersports sector in the face of high interest rates, an uncertain macro backdrop and tariffs,” Fitch’s Brown said. HDFS portfolio shrinks 6% HDFS’ operating income is projected to decline in 2026 compared with pre-transaction volumes due to a reduced portfolio, according to the presentation. The captive’s operating income in Q2 dipped 2% YoY to $70 million, while revenue also decreased 2% YoY to $257 million. However, the transaction is expected to generate between $275 million and $300 million in operating income this year, Zeitz said. The financier’s portfolio stood at $6.6 billion in Q2, down 5.7% YoY , according to the presentation, which did not break out originations. The rate of annualized retail credit losses was 3.3%, up 20 basis points (bps) YoY, while the allowance for losses was 5.7% of the portfolio, up 30 bps YoY. “The June 2025 annualized retail credit loss ratio was further negatively impacted by a decline in retail receivables, while delinquencies remained elevated as customers continue to be impacted by higher bike payments and general inflationary pressures,” Root said. After the transaction, HDFS will retain servicing and continue to manage about a third of future originations and all dealer receivables, but credit risk will largely shift to the asset management firms. HDFS’ on-balance sheet managed portfolio is expected to reach about $3 billion in the next few years. “HDFS will continue providing dealers with service benefits and flexibility commensurate with what HDFS currently provides,” Zeitz said. The lender will also lean on “new fee streams from loan originations and servicing fees and organic growth, along with the commercial finance, insurance, car products and international partnerships that we retain,” Zeitz said. The receivables sale does not include wholesale loans and does not affect commercial lending or insurance products, Root said. Livewire motorcycle sales down 65% Meanwhile, sales at Harley-Davidson's electric motorcycle subsidiary Livewire declined 65% YoY to 55 units in Q2, according to the presentation. Sales of electric balance bikes and electric bikes rose 25% YoY to 4,730 units. “The uncertain macro environment and the lack of any incentive continued to weigh on the consumers’ discretionary appetite for bigger motorcycles and early-stage EV products,” Root said. Livewire posted an operating loss of $18.7 million in Q2, compared to a $28.2 million loss in the corresponding quarter last year, while revenue declined 7% YoY to $6 million. Full-year operating loss is projected at between $59 million and $69 million, Root said. Shares of Harley-Davidson Inc. [NYSE: HOG] were up 15.1% from market open to $26.42 as of 2:42 p.m. ET today. The manufacturer has a market capitalization of $3.2 billion. Shares of LiveWire Group Inc. [NYSE: LVWR] were up 5.8% from market open to $4.19 as of 2:42 p.m. ET today. The manufacturer has a market capitalization of $852.9 million. Charles Do, senior vice president of Harley Davidson Financial Services, will join a discussion on motorcycle financing trends at Powersports Finance Summit, a premier event for companies involved in recreational vehicle financing. The summit returns Sept. 23-24 at the Sonesta Columbus. To learn more about the 2025 event and register, visit www.PowersportsFinance.com . Submit nominations for an executive or company for the 2025 annual Powersports Finance Achievement Awards here .

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