The SEC staff, upon reviewing the Form S-3 filed by Harley-Davidson Customer Funding Corp., inquired further regarding the company's use of the Federal Reserve Board's emergency lending facility known as the Term Asset-Backed Securities Loan Facility ("TALF"). Harley-Davidson intended to obtain financing from the TALF in order to issue motorcycle ABS. The TALF was established under the Fed's authority under Section 13(3) of the Federal Reserve Act for the purpose of restarting the securitization markets amid the ongoing financial turmoil. The Federal Reserve Bank of New York administers the TALF. The terms and conditions, FAQs, Master Loan and Security Agreement, and other documentation pertaining to the TALF impose a number of conditions on participation in the TALF, including disclosure requirements for prospectuses and other offering documents.

The staff first asked Harley-Davidson to provide additional disclosures in its prospectus supplement regarding a number of items, including an explanation of the requirements and limits applicable to TALF loans as well as a definition of what constitutes "eligible collateral" under the TALF. The company also must attach an exhibit containing the TALF eligibility certification and include a statement that the final certification will be included in the final Rule 424(b) prospectus. To address the general requirements and limitations of the TALF, the company agreed to include a new section titled "TALF Considerations". The "TALF Considerations" section discusses, among other things, the requirements to obtain financing under the TALF, the reasons why the company believes that its motorcycle ABS will satisfy the TALF eligibility requirements, and provides cross-references to the risk factors section, which contains additional information concerning the risks involved in financing newly issued ABS through the TALF. The company also noted that it will include an Appendix B that contains the eligibility certification and will provide the required confirmation that the final certification will be disclosed in its Rule 424(b) prospectus.

In its original comment letter and in follow-up comments, the staff inquired regarding the various risk factors associated with using the TALF to finance the issuance of motorcycle ABS. In particular, the staff asked Harley-Davidson to explain the risk that the proposed motorcycle ABS collateral may become ineligible for TALF financing, including the risks associated with creditworthiness, maturity limits, funding deadlines, the nonrecourse character of TALF loans, and the requirement that eligible collateral be pledged on the subscription date. Similarly, the staff asked the company to discuss how credit ratings affect TALF eligibility, the credit ratings ABS must achieve to be TALF-eligible, and the fact that a ratings downgrade would render ABS collateral ineligible for additional TALF loans. With respect to the potential for a ratings downgrade, the company must discuss the factors that could produce such result, including the current economic climate, the motorcycle industry, and Harley-Davidson itself. The company stated that it would include in its prospectus supplement a risk factor titled "The requirements of TALF may adversely affect the market value and liquidity of your notes". Moreover, the company must discuss the risk inherent in the failure to repay a TALF loan. Here, the staff requested that the company provide disclosure explaining that the Federal Reserve Bank of New York may enforce its rights in pledged collateral by selling the collateral to a special purpose vehicle established to manage TALF collateral.

In addition, the staff directed Harley-Davidson to explain how it will ensure that 95 percent of the underlying credit exposures related to the motorcycle ABS to be pledged as collateral for TALF loans will in fact be U.S.-domiciled obligors, as required under the TALF. The staff observed that the company's filings indicated that up to five percent of the underlying credit exposures may be outside of the U.S. The company replied that it will cross-check the billing addresses of the pool obligors (according to outstanding principal balance) against the aggregate principal amount of all contracts in the pool as of the relevant statistical cut-off dates and the final cut-off dates. The company's outside accounting firm also will also test the data. The company must further verify in its offering documents that the proposed motorcycle ABS collateral will be TALF-eligible on the closing date. As of publication, the staff had not issued a no further comments letter.