Harley-Davidson It is going through an economic, corporate and industrial period that is far from what the brand would have imagined just a few years ago. As if this were not enough, recently, the “independent” rating agency S&P Global has lowered the company’s credit rating, going from a BBB- status to the lowest rank BB+with what this entails for the North American firm in international markets.
S&P Global valuation based on “slow growth” of HD
Since the end of 2024, Harley-Davidson has chained one crisis after another with a change of leadership in between. After adopting a series of measures with which to stabilize the economy and growth of the company, with Artie Starrs With the new CEO of the brand at the helm, it now seems that corporate entities in the finance sector, such as the rating agency S&P Global, do not believe that Harley-Davidson’s business and economic resurgence will take place in the short or medium term.
The result of this conclusion is the downgrade of its issuer credit rating for Harley-Davidson Inc. from ‘BBB-‘ to ‘BB+’ “due to slow growth and stabilization of its margins”although they point out that they see stable prospects for the growth of the brand. Furthermore, in the report issued by S&P Global they refer precisely to the strategic update “Back to Bricks” presented by the Milwaukee brand last May.
Within this corporate plan, an attempt will be made to recover lost commercial performance and achieve profitable growth. Among the measures included is the expected return of the emblematic Sportster and Sprint acronyms, in addition to focusing on the profitability of dealers, expanding sales of spare parts and accessories, and using more specific promotions.
Harley-Davidson presents a solid liquidity outlook
However, from the economic perspective of S&P Global, they do not see this package of measures as clear: “While the new models could boost retail sales upon their launch, especially with the return of the Sportster motorcycle, it may take several years for Harley-Davidson to maintain sufficient growth in retail sales and wholesale unit shipments to stabilize the S&P Global Ratings-adjusted EBITDA margin near 10%.”they explain.
From here on, the aforementioned valuation agency has stated in this regard:
- As a result, we lowered our issuer credit rating on Harley-Davidson Inc. from ‘BBB-‘ to ‘BB+’.
- We also downgraded the issue rating on Harley’s unsecured debt to ‘BB+’ from ‘BBB-‘, in line with the issuer’s credit rating, and assigned a recovery rating of ‘3’ to Harley-Davidson Inc.’s senior unsecured notes.
- Additionally, we downgraded our short-term rating on Harley Davidson Financial Services Inc. (HDFS) to ‘B’ from ‘A-3’.
- We also lowered our risk rating on HDFS’s medium-term bonds from ‘BBB-‘ to ‘BB+’.
Does all this mean that Harley-Davidson could end up filing for financial bankruptcy? We honestly believe not. Rather, the process of economic recovery and position in the global market will be long and tedious. From S&P Global they end up pointing out in this regard:
“The stable outlook reflects Harley-Davidson’s strong liquidity and its commitment to maintaining a low level of captive-adjusted leverage. We also anticipate modest improvements in retail and wholesale volumes, with S&P Global Ratings-adjusted and captive-adjusted EBITDA margin expanding to a high-single-digit percentage over the next two years, as the company completes its restructuring this year, which will improve operating leverage.”
