Fitch Expects to Rate Harley-Davidson Financial's Unsecured Notes 'BBB+'

Fitch Ratings expects to assign a rating of 'BBB+' to the $400 million five-year medium-term note transaction for Harley-Davidson Financial Services, Inc. (HDFS). HDFS is the captive finance subsidiary of Harley-Davidson, Inc. (HOG), a manufacturer of motorcycles. The Rating Outlook is Positive.

On Aug. 1, 2011, Fitch affirmed the long-term Issuer Default Ratings (IDRs) at 'BBB+' for HOG and its subsidiaries, HDFS and Harley-Davidson Funding Corp. (HDFC). In addition, Fitch revised the Rating Outlook to Positive from Stable for all three entities.

The ratings and Outlook for HDFS are linked to those of its parent, HOG. HDFS' ratings reflect its close operating relationship with HOG, which is governed by a support agreement in favor of debt holders under which HOG must maintain HDFS' fixed charge coverage at 1.25 times (x) and minimum net worth of $40 million.

HDFS' operating performance and financial profile have improved over the past couple of years. HDFS reported improved earnings on continued good asset quality performance for the year ended, Dec. 31, 2011. The company recorded operating income of $56.8 million in the fourth quarter of 2011, compared to operating income of $43.5 million during the same period a year prior. This increase was largely due to continued improving credit performance. For the full year 2011, operating income for HDFS was $268.8 million, compared to $181.9 million last year.

Fitch expects increased earnings at HDFS, driven by continued good asset quality performance, stable funding costs and improved operating efficiencies. Reduced provisioning levels are expected as a result of low delinquency levels and higher recovery values. Fitch expects asset quality performance to remain at or near current levels or improve slightly in the near term.

HDFS is the captive finance subsidiary of HOG, established to support the sale of HOG products while providing a satisfactory return on invested capital to its parent.

Fitch expects to assign the following rating:

Harley-Davidson Financial Services, Inc.

--Senior unsecured debt at 'BBB+'.

Fitch currently rates HOG, HDFS, and HDFC as follows:

Harley-Davidson, Inc.

--Long-term IDR 'BBB+';

--Senior unsecured debt at 'BBB+'.

Harley-Davidson Financial Services, Inc.

--Long-term IDR 'BBB+';

--Short-term IDR 'F2';

--Senior unsecured debt at 'BBB+'.

Harley-Davidson Funding Corp.

--Long-term IDR 'BBB+';

--Short-term IDR 'F2';

--Commercial paper at 'F2';

--Senior unsecured debt at 'BBB+'.

The Rating Outlook is Positive.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011);

--'Global Financial Institutions Criteria' (Aug. 16, 2011);

--'Rating Linkages in Nonbank Financial Subsidiary Relationships' (Nov. 29, 2011);

--'Finance and Leasing Companies Criteria' (Dec. 12, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

Rating Linkages in Nonbank Financial Subsidiary Relationships

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656583

Finance and Leasing Companies Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=659834

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Contacts:

Fitch Ratings
Contact (HDFS and HDFC):
Primary Analyst:
Johann Juan, [phone]
Director
Fitch, Inc.
70 W Madison St
Chicago, IL 60602
or
Secondary Analyst
Mohak Rao, CFA, [phone]
Director
or
Committee Chairperson:
Ed Thompson, [phone]
Senior Director
or
Contact (HOG):
Primary Analyst:
Stephen Brown, [phone]
Senior Director
Fitch, Inc.
70 W Madison St
Chicago, IL 60602
or
Secondary Analyst:
Craig Fraser, [phone]
Managing Director
or
Fitch Ratings
Media Relations:
Brian Bertsch, New York, [phone]
[e-mail]