CheckHarley-Davidson soars on Buffett bond investment
Tue Feb 3, 2009 6:41pm GMT
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NEW YORK, Feb 3 (Reuters) - Harley-Davidson Inc (HOG.N: Quote, Profile, Research) on Tuesday announced the sale of $600 million of debt, including half to Warren Buffett's Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research), causing shares of the largest U.S. motorcycle maker to rise as much as 22.6 percent.
Berkshire and money manager Davis Selected Advisers LP, the largest Harley shareholder, each bought $300 million of senior unsecured notes carrying an annual interest rate of 15 percent, roughly twice the yield of a typical investment-grade corporate bond. The notes mature in 2014.
The sale provides Milwaukee-based Harley with more cash after losses at its financing arm led to a 58 percent decline in fourth-quarter profit. Harley is also cutting 1,100 jobs, or more than 12 percent of its workforce, over two years.
"Harley's finance arm needs capital in a highly constrained credit environment," said Ed Aaron, an analyst at RBC Capital Markets in Denver. "We knew capital would be available at a price. The stock is up because Harley resolved part of its liquidity needs."
Aaron has a "sector perform" rating on Harley stock.
Berkshire is making more investments as the credit crunch forces companies to seek out new funding sources. Corporate credit spreads are near their record highs set in December.
Buffett, 78, has historically preferred companies with strong management and market-leading positions.
In late 2008, Omaha, Nebraska-based Berkshire bought $8 billion of Goldman Sachs Group Inc (GS.N: Quote, Profile, Research) and General Electric Co (GE.N: Quote, Profile, Research) preferred stock and $300 million of convertible notes from building materials supplier USG Corp (USG.N: Quote, Profile, Research), all yielding 10 percent annually. Continued...
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Topic: Help for Harley (Read 674 times)