Harley's amazing downhill ride

harley_davidson.top.jpgBy Carol J. Loomis, senior editor-at-large

NEW YORK (Fortune) -- Today is an anniversary for motorcycle manufacturer Harley-Davidson that it would just as soon not remember.

On February 3rd a year ago, with the stock market hurtling toward its March lows, Harley (HOG, Fortune 500) announced it had sold $600 million in five-year notes at a nosebleed interest rate of 15%. Yes, 15%, because the company needed the money to fund its finance company and had to pay what the market demanded.

The market, in this case, included Warren Buffett, whose Berkshire-Hathaway (BRK.B) had been husbanding cash for years, and who was pleased to give $300 million of that money to Harley at 15%. The other $300 million was put up by Davis Advisors, a mutual fund company whose Chris Davis saw Harley notes as a fine investment for his funds (which, by the way, also own Harley stock).

The annual $90 million of interest those notes carry certainly didn't help out Harley's 2009 results, though a recession that was killing sales of discretionary goods would have led to a financial wreck in any case. For the year, Harley reported shipments that were down 27% from 2008 and ended up with a $55 million loss -- its first red ink since 1993.

Still, 2009 had its redeeming features for Harley, and these certainly began with its stock price. For the year, as investors anticipated the company regaining its zoom, its stock rose by 53%.

Meanwhile, the great 2009 bull-market in junk-bond prices was producing an astounding turn in interest rates. In December, Harley sold still another block of 5-year notes -- $500 million -- at a 5¾% rate.

For swings in what it costs to do business, and for a reminder of just how remarkable the securities markets were in 2009, a 15% rate down to 5¾% is an amazing ride.

-- The author of this article is both a friend of Warren Buffett and a Berkshire Hathaway shareholder. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Find Your Next Car
Company Price Change % Change
Bank of America Corp... 16.13 -0.26 -1.59%
Facebook Inc 59.72 0.63 1.07%
Yahoo! Inc 36.35 2.14 6.26%
Intel Corp 26.93 0.16 0.60%
Alcoa Inc 13.42 0.37 2.84%
Data as of 4:02pm ET
Index Last Change % Change
Dow 16,424.85 162.29 1.00%
Nasdaq 4,086.23 52.07 1.29%
S&P 500 1,862.31 19.33 1.05%
Treasuries 2.64 0.01 0.34%
Data as of 7:53pm ET


The company continues to struggle with convincing marketers to pay as much for mobile ads as they do for desktop ads. More

Observers are warning that risks of a blow up in China's property market are rising, threatening a slowdown that could hurt global growth. More

The company continues to struggle with convincing marketers to pay as much for mobile ads as they do for desktop ads. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

Pamela Knighton, a 51-year-old social worker from Cuthbert, Ga. who earns less than $25,000 a year, had been really looking forward to her $4,300 tax refund last year. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.