Berkshire To Buy $300 Million Of Debt From Harley-Davidson

A 15% coupon?!! WOW!

Good to be rich!

• Feb. 3 (Bloomberg) -- Billionaire investor Warren Buffett’s Berkshire Hathaway Inc. agreed to buy $300 million of debt from Harley-Davidson Inc., the biggest U.S. motorcycle maker, adding to holdings of corporate debt as yields rise.
  
  Berkshire will get 15 percent interest on the senior unsecured notes, Milwaukee-based Harley said today in a statement. Davis Selected Advisers LP, the largest holder of the company’s stock, also committed to buy $300 million of debt. Harley, which is raising cash to lend to customers, rose the most in more than two decades in New York trading.
  
  Buffett is arranging private deals with some of the most recognizable U.S. brands and taking advantage of rising interest rates as the global credit crunch drives off his competitors. He committed $6.5 billion in April to help Mars Inc. buy chewing gum maker Wm. Wrigley Jr. Co., and $8 billion on preferred shares in General Electric Co. and Goldman Sachs Group Inc.
  
  “This economy is certainly providing him with opportunities,” said Frank Betz, a partner at Carret Zane Capital Management, which holds Berkshire shares. “He probably looks at Harley motorcycles as having a strong long-term demand in the marketplace.”
  
  Harley gained $1.87, or 16 percent, to $13.73 at 4:02 p.m. in New York Stock Exchange composite trading after earlier reaching $14.55, the biggest gain since November 2008. The motorcycle maker has lost about two-thirds of its market value in the past year. Berkshire advanced $1,100, or 1.2 percent, to $90,500.
  
  Corporate Debt
  
  Buffett is adding holdings of fixed-income securities to help deploy more than $30 billion in Berkshire’s cash. The Omaha, Nebraska-based firm held about $9.7 billion in corporate debt and redeemable preferred stock at its insurance units as of Sept. 30, an increase of 61 percent from a year earlier. In November, Buffett agreed to buy $300 million in debt from USG Corp., North America’s largest maker of gypsum wallboard.
  
  Average yields on corporate bonds with BBB ratings jumped to 9 percent yesterday from 6.1 percent a year ago, according to Merrill Lynch & Co.’s U.S. Corporates, BBB Rated index. They reached a 17-year high of 10.2 percent on Oct. 31 as a global credit crisis made buyers of corporate debt scarce.
  
  Harley is the world’s largest seller of cruisers, models for leisure riding that are often equipped with engines 1000cc or larger, chrome exhaust pipes and 1950s styling.
  
  Harley said Jan. 23 fourth-quarter profit fell 58 percent due to weaker demand for its motorcycles. The net income of $77.8 million, or 34 cents a share, was the lowest quarterly profit in nine years.
  
  Fat Boy
  
  Sales for the maker of Fat Boy and other cruisers fell in 2008 as the U.S. economy slowed and access to consumer credit tightened. List prices for Harleys range from $6,999 to $35,499.
  
  Harley is working to cut 1,100 jobs and close three plants to save at least $60 million a year. About 70 percent of the firings will take place this year and the rest in 2010, the company said.
  
  The debt sale provides a “short-term fix,” said Robin Farley, an analyst at UBS AG, in a note to investors today, because the company has $500 million in bank debt coming due at the end of next month and needs about $1 billion to extend loans to customers through its financing arm. Farley has a “neutral” rating on Harley-Davidson stock.
  
  The offering was arranged by Morgan Stanley. Citigroup Inc., Deutsche Bank AG, JPMorgan Chase & Co. and Morgan Stanley acted as underwriters for the transaction.
  
  “To our knowledge this is Berkshire’s first significant involvement with the company,” Harley spokesman Bob Klein said in an interview. Neither Harley Chief Executive Officer Jim Ziemer or Tom Bergmann, the company’s chief financial officer, were immediately available to discuss Berkshire’s investment

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