How Warren Buffett¡¯s ¡®$300 Million Help¡¯ Once Saved Harley Davidson From A Financial Crisis

Just a couple of days ago, American motorcycle manufacturer Harley Davidson completed 120 years and celebrated it with the launch of its seven limited-edition motorcycles.

But do you know, about 14 years ago, the company was reeling under pressure to survive the economic slowdown during 2009? And that time, it was ace investor Warren Buffett¡¯s company Berkshire Hathaway which helped rescue it.

Warren Buffett's $300 Million Rescue

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Harley-Davidson had announced in February 2009 that Warren Buffett¡¯s Berkshire Hathaway and Harley¡¯s then biggest shareholder Davis Selected Advisers, L.P., have each committed to pumping in money by buying $300 million in senior unsecured notes, which became due in 2014.

The money will be used to support Harley¡¯s finance company and its ¡°ongoing motorcycle lending activities.¡± The deal, as per a CNBC report, was part of Harley¡¯s three-pronged strategy to counter weak economic times: boost consumer demand by investing in the Harley brand, cut costs, and get additional funding for its finance arm.

Harley shares had jumped up sharply after that news, gaining over 14 percent to $13.56 in early afternoon trading that day.

Harley-Davidson in a statement in 2013 had said it has priced an offering of $600 million of senior unsecured notes as part of its plan "to fund the ongoing motorcycle lending activities of its wholly-owned finance company, Harley-Davidson Financial Services".

According to the statement, the company's largest shareholder -- Davis Selected Advisers, LP and Buffett-led Berkshire Hathaway would be purchasing "equal portions of the aggregate principal amount of the notes".

Also Read: Warren Buffett's Likely Successor Greg Abel Buys Berkshire Hathaway's $68 Million Shares

What Warren Buffett Got In Return?

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In return for buying bonds, Harley-Davidson was said to be would be paying an interest of 15 per cent on the total investment to Warren Buffett¡¯s Berkshire Hathaway and Davis Selected Advisers, as per various media reports.

"The notes will be due in 2014 and will bear interest at a rate of 15 per cent per annum," Harley Davidson had said in a statement.

Now, after 14 years of this incident, it is hard to imagine how the American motorcycle giant would have gone on to survive the 2009 financial crisis had Warren Buffett not come to the rescue with the much-needed $300 million.

Do you also know that it was a lost iPhone that led Warren Buffett to invest in Apple? Click here to read that story!

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