PROSPECTUS

Harley-Davidson Motorcycle Trust 2023-A​

Issuing Entity or the Trust
(CIK: 0001963533)

$550,000,000 Motorcycle Contract Backed Notes​

The notes will represent obligations of Harley-Davidson Motorcycle Trust 2023-A only, and will not represent obligations of or interests in Harley-Davidson Financial Services, Inc., Harley-Davidson Credit Corp., Harley-Davidson Customer Funding Corp., Harley-Davidson, Inc. or any of their respective affiliates other than the issuing entity. The notes are motorcycle contract backed notes issued by the issuing entity. Payments on the notes will be made monthly on the 15th day of each month or, if the 15th is not a business day, on the business day immediately following the 15th. The first payment date is March 15, 2023. The assets securing the notes are fixed rate, simple interest promissory notes and security agreements relating to the purchase of new or used motorcycles.

Consider carefully the risk factors beginning on page 18 in this prospectus.

The issuing entity will issue the classes of notes described below:

(1)

The difference between the initial principal amount and the initial offered amount of each class of notes represents approximately 5% of the initial principal amount of that class of notes, and such notes initially will be retained by the depositor or another majority-owned affiliate of the sponsor in compliance with Regulation RR under the Securities Exchange Act of 1934, as amended (“Regulation RR”).

​

(2)

The interest rate will be based on a benchmark which initially will be 30-day average SOFR. However, the benchmark may change in certain situations. If the sum of 30-day average SOFR (or the applicable benchmark) and the spread is less than 0.00% for any interest period, then the interest rate for the Class A-2b notes for such interest period will be 0.00%. For more information regarding the calculation of the interest rate on the Class A-2b notes see “Description of the Notes and the Indenture—Calculation of Floating Rate Interest”.

​

Credit Enhancement:

•

Overcollateralization.

​

•

Yield supplement overcollateralization amount.

​

•

Reserve fund.

​

•

Excess cash flow.

​

The issuing entity is exempted from the definition of “investment company” pursuant to Rule 3a-7 of the Investment Company Act of 1940, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the “Volcker Rule”, Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Joint Bookrunners

Co-Managers

Prospectus dated February 13, 2023

 

TABLE OF CONTENTS

 

i

 

 

ii

 

 

iii

 

 

iv

 

Regarding this prospectus

References to “we”, “our” and “us” refer to Harley-Davidson Customer Funding Corp.

We include cross-references in this prospectus to captions in these materials where you can find further related discussions. The Table of Contents of this prospectus provides pages on which these captions are located.

Certain matters discussed by us in this prospectus are “forward-looking statements”, or a projection of what we think will happen in the future. These forward-looking statements can generally be identified as such by reference to this note or because the context of the statement will include words such as we “believe”, “anticipate”, “expect”, “plan”, or “estimate” or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this prospectus. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this prospectus, including under the caption “Risk Factors” in this prospectus. You are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this prospectus are made only as of the date of this prospectus, and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, including changes in economic conditions, portfolio or asset pool performance or other circumstances or developments that may arise after the date of this prospectus, other than as required by law.

If you have received a copy of this prospectus in an electronic format, and if the legal prospectus delivery period has not expired, you may obtain a paper copy of this prospectus from Harley-Davidson Credit Corp. or any of the underwriters by asking any of them for it.

 

v

 

Summary of Transaction Structure and Flow of Funds

This structural summary briefly describes certain major structural components, the relationships among the parties, the flow of proceeds from the issuance of the notes and certain other material features of the transaction. This structural summary does not contain all of the information that you need to consider in making your investment decision. You should carefully read this entire prospectus to understand all the terms of this offering.

Harley-Davidson Customer Funding Corp., the depositor, will purchase from Harley-Davidson Credit Corp., the sponsor, a pool of motorcycle promissory notes and security agreements purchased by Harley-Davidson Credit Corp. from Eaglemark Savings Bank. Harley-Davidson Customer Funding Corp. then will sell the contracts to Harley-Davidson Motorcycle Trust 2023-A, the issuing entity. The following chart illustrates the use of proceeds from investors by the issuing entity and the depositor to purchase the contracts.

 

vi

 

Flow of Funds

On each payment date prior to an acceleration of the notes, the issuing entity will apply collections on the contracts received during the prior calendar month, servicer advances and, with respect to payments of principal of and interest on the notes, funds transferred from the reserve fund, together with certain other amounts received by the issuing entity (see “Payments to the Noteholders—Available Amounts” for a further description of amounts available to make payments on the notes) to make the following payments in the following order of priority:

Reimbursement of servicer advances, to the servicer

The servicing fee, to the servicer

The indenture trustee fee, expenses and indemnity amounts, to the extent not already paid by the administrator on behalf of the issuing entity, to the indenture trustee (subject to a cap)

The asset representations reviewer fees, expenses and indemnity amounts, to the extent not already paid by the administrator on behalf of the issuing entity, to the asset representations reviewer (subject to a cap)

Pro rata, interest due on the notes, to the noteholders

The principal distributable amount, sequentially to the holders of the notes (and pro rata between the Class A-2a notes and the Class A-2b notes)

To the reserve fund, the amount, if any, needed to fund the reserve fund to the required amount

Any indenture trustee fees, expenses and indemnity amounts due but not paid above, to the indenture trustee

Any asset representations reviewer fees, expenses and indemnity amounts due but not paid above, to the asset representations reviewer

Any remaining funds, to the certificateholder under the trust agreement

*

This flow chart provides only a simplified overview of the monthly flow of funds prior to an acceleration of the notes. The priority of payments of principal of and interest on the notes will be different after an acceleration of the notes following an event of default. See “Payments to the Noteholders—​Distributions” in this prospectus for a more detailed description.

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vii

 

1

 

Class

​

​

Initial Principal Amount

​

​

Initial Offered Amount(1)

​

​

Interest Rate

​

Class A-1

​

​

​

$

101,000,000

​

​

​

​

$

95,950,000

​

​

​

​

​

4.975%

​

​

Class A-2a

​

​

​

$

170,400,000

​

​

​

​

$

161,880,000

​

​

​

​

​

5.32%

​

​

Class A-2b

​

​

​

$

50,000,000

​

​

​

​

$

47,500,000

​

​

​

​

​

Benchmark + 0.53%(2)

​

​

Class A-3

​

​

​

$

194,200,000

​

​

​

​

$

184,490,000

​

​

​

​

​

5.05%

​

​

Class A-4

​

​

​

$

63,350,000

​

​

​

​

$

60,180,000

​

​

​

​

​

4.97%

​

​

2

 

3

 

4

 

5

 

​	Initial Pool Balance	​	​	$628,507,157.14	​
​	Number of Contracts	​	​	32,361	​
​	Average Principal Balance	​	​	$19,421.75	​
​	Principal Balance of Contracts (Range)	​	​	$536.41 to $76,126.15	​
​	Weighted Average Contract Interest Rate	​	​	7.515%	​
​	(Range)	​	​	0.010% to 11.000%	​
​	Weighted Average Original Term (in months)	​	​	71	​
​	(Range)(1)	​	​	24 to 84	​
​	Weighted Average Remaining Term (in months)	​	​	62	​
​	(Range)(1)	​	​	3 to 83	​
​	Weighted Average FICO® Score at Origination	​	​	758	​
​	FICO® Score (Range) at Origination	​	​	670 to 850	​
​	Weighted Average Loan-to-Value	​	​	102.11%	​
​	New Motorcycle at Origination(2)	​	​	61.32%	​
​	Used Motorcycle at Origination(2)	​	​	38.68%	​

​

6

 

State(1)	​	​	Principal Balance Concentration				​
California	​	​	​	​	10.32%	​	​
Texas	​	​	​	​	9.30%	​	​
Florida	​	​	​	​	6.80%	​	​

7

 

8

 

9

 

10

 

​

11

 

​

12

 

13

 

Class	​	​	CUSIP				​
Class A-1	​	​	​	​	41285JAA6	​	​
Class A-2a	​	​	​	​	41285JAB4	​	​
Class A-2b	​	​	​	​	41285JAC2	​	​
Class A-3	​	​	​	​	41285JAD0	​	​
Class A-4	​	​	​	​	41285JAE8	​	​

14

 

​

15

 

​

16

 

​

17

 

Risk Factors

The following risk factors describe the principal risk factors relating to an investment in the notes. You should carefully consider the following risks before you invest in the notes.

Risks relating to the nature of the notes and the structure of the transaction

The issuing entity’s assets are limited and, together with certain forms of credit enhancement, are the only source of payment on your notes, and may not be sufficient to make full payment on your notes

The issuing entity does not have, and will not be permitted or expected to have, any significant assets or sources of funds other than the contracts, the reserve fund and any other available credit enhancement or issuing entity property specified in this prospectus. Your notes represent indebtedness of the issuing entity and will not be insured or guaranteed by the originator, the seller, the servicer, the depositor, or any of their respective affiliates, the indenture trustee, the owner trustee or any other person or entity.

The only source of payment for your notes is payments received on the contracts that the issuing entity holds and certain forms of credit enhancement as specified in this prospectus. The overcollateralization target amount are expected to be maintained over time, and the reserve fund will be funded at its required level on the closing date. There can be no assurance, however, that the contracts will generate sufficient collections to maintain the overcollateralization target amount, to maintain the balance of the reserve fund at its required level, or to pay the notes in full. If the credit enhancement provided by overcollateralization, the yield supplement overcollateralization amount and the reserve fund and the assets of the issuing entity are exhausted, you will directly bear losses on your notes.

The notes may not be a suitable investment for any investor that requires a regular or predictable schedule of principal payments. We suggest that only investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment and default risks, the tax consequences of an investment and the interaction of these factors, consider purchasing the notes.

The proceeds of the sale of contracts may not be sufficient to pay your notes in full; failure to pay principal of your notes will not constitute an event of default until maturity

If the issuing entity fails to pay principal of any class of notes on its final scheduled payment date, or fails to pay interest on any class of notes within five days of the related due date, the indenture trustee or the holders of a majority of the outstanding principal amount of the notes may declare all of the notes to be due immediately. If this happens, the holders of a majority of the outstanding principal amount of the notes may direct the indenture trustee to cause the sale of the contracts and prepay the notes. However, there is no assurance that the market value of those contracts will at any time be equal to or greater than the aggregate outstanding principal amount of the notes. Therefore, upon a sale of the contracts, there can be no assurance that sufficient funds will be available to repay your notes in full. If the proceeds from the sale of the contracts are insufficient to pay the full outstanding principal amount of your notes, you may experience losses with respect to your notes.

In addition, the amount of principal required to be paid to you on each payment date will generally be limited to amounts available in the collection account and the reserve fund, if any. The failure to pay principal of your notes generally will not result in the occurrence of an event of default until the final scheduled payment date for your notes.

See “Description of the Notes and the Indenture—The Indenture—Events of Default; Rights Upon Event of Default” in this prospectus.

The issuing entity’s recourse against the seller, the depositor and the servicer is limited to certain repurchase and/or purchase obligations

In connection with the sale of contracts by the depositor to the issuing entity, the depositor will make representations and warranties with respect to certain characteristics of such contracts, and in certain circumstances, the depositor may be required to repurchase contracts with respect to which such representations and warranties have been breached. The seller will correspondingly be obligated to the

 

18

 

depositor under the transfer and sale agreement (which rights of the depositor against the seller will be assigned to the issuing entity) to repurchase the contracts from the depositor contemporaneously with the depositor’s repurchase of the contracts from the issuing entity. In addition, the servicer may be required to purchase contracts from the issuing entity if the servicer breaches certain servicing obligations relating to those contracts as specified in the sale and servicing agreement. There can be no assurance that the depositor, the seller or the servicer will be able to purchase or repurchase a contract at the time that it has an obligation to do so. See “Description of the Transfer and Servicing Agreements—Sale and Assignment of Contracts by Seller”, “Description of the Transfer and Servicing Agreements—Representations and Warranties Made by the Seller and the Depositor” and “Description of the Transfer and Servicing Agreements—Servicing”.

Lack of a secondary market and financial market disruptions could negatively affect the liquidity of the notes and could limit your ability to resell your notes

There is currently no secondary market for the notes. If a secondary market for your notes does not develop or becomes disrupted, it could limit your ability to resell your notes or, if you find a buyer, the selling price might be less than it would have been had a secondary market developed.

Even if a secondary market for the notes develops, events in the global financial markets (for example, the weakened financial condition of major financial institutions, the devaluation of certain assets in secondary markets, the forced sale of asset-backed and other securities by certain investors, and the lowering of ratings on certain asset-backed securities) historically have caused, and may in the future cause, the secondary market for asset-backed securities to experience significantly reduced liquidity, which could limit your ability to resell your notes and adversely affect the price of your notes. The underwriters will not be obligated to make offers to buy the offered notes or otherwise make a market for any class of notes, and may stop making offers at any time. In addition, the underwriters and other broker-dealers may be unable, unwilling or restricted from making a market in, or publishing quotations on, the offered notes due to regulatory requirements or otherwise. As a result, you may not be able to sell your notes when you want to do so or you may not be able to obtain the price that you wish to receive.

A withdrawal, downgrade or qualification of the initial ratings of the notes, or the issuance of unsolicited ratings on your notes, could adversely affect the market value of your notes and/or could limit your ability to resell your notes

The sponsor has hired two rating agencies and will pay them a fee to assign ratings on the notes. The initial ratings given to the offered notes are not a recommendation to buy, sell or hold securities. Such rating reflects the rating agency’s assessment of the creditworthiness of the contracts, the credit enhancement on the notes and the likelihood of repayment of the notes. There can be no assurance that the contracts and/or the notes will perform as expected or that the ratings will not be reduced, withdrawn or qualified in the future as a result of a change of circumstances (including adverse developments with respect to the seller or its affiliates), deterioration in the performance of the contracts, errors in analysis or other factors. See “—Risks relating to the transaction parties—Adverse events with respect to the seller, the servicer or their affiliates may affect the timing of payments on your notes or have other adverse effects on your notes” below. None of the depositor, the sponsor or any of their affiliates will have any obligation to replace or supplement any credit enhancement or to take any other action to maintain any ratings on the notes. If the ratings on your notes are reduced, withdrawn or qualified, it could adversely affect the market value of your notes and/or limit your ability to resell your notes.

Additionally, the sponsor or the depositor is required to provide the hired rating agencies with information requested by such rating agencies and to comply with their respective obligations contained in the engagement letters with such rating agencies, such as the posting of information provided to the rating agencies hired by the sponsor to rate the notes on a website that is accessible by other nationally recognized statistical rating organizations, or “NRSROs”, that were not hired by the sponsor in connection with the issuance of the notes.

The sponsor has not hired any other NRSRO to assign ratings on the notes and is not aware that any other NRSRO has assigned or will assign ratings on the notes. However, under SEC rules, information that the sponsor (or another acting on the sponsor’s behalf) has provided to a rating agency that the sponsor hired for the purpose of assigning or monitoring the ratings on the notes must be available to each other

 

19

 

NRSRO to make it possible for such other NRSROs to assign unsolicited ratings on the notes. An NRSRO could assign a rating that the sponsor has not solicited at any time, including prior to the closing date, and none of the depositor, the sponsor, the underwriters or any of their affiliates will have any obligation to inform you of any unsolicited ratings that an NRSRO has assigned after the date of this prospectus. NRSROs, including the rating agencies that the sponsor hired to rate the notes, have different methodologies, criteria, models and requirements. If any non-hired NRSRO assigns an unsolicited rating on the notes, such rating may be lower than the ratings that the rating agencies that the sponsor hired to rate the notes have provided, which could adversely affect the market value of your notes and/or limit your ability to resell your notes.

Similar ratings on different types of notes do not necessarily mean the same thing. You should analyze the significance of each rating independently from any other rating. At any time, a rating agency may lower its ratings on the notes or withdraw its ratings entirely if, in the rating agency’s judgment, circumstances in the future so warrant. If a rating assigned to any security is lowered or withdrawn for any reason, possible consequences include that you may not be able to resell your notes or that you may be able to resell them only at a substantial discount. For more detailed information regarding the ratings assigned to any class of notes, see “Ratings of the Notes” in this prospectus.

Losses may occur following an acceleration of the notes

If the maturities of the notes are accelerated following an event of default, the indenture trustee under certain circumstances may sell the issuing entity’s assets. In any such event, the proceeds from the sale of the issuing entity’s assets may not be sufficient to pay all of the notes in full.

For example, if the maturity dates of the notes are accelerated following an event of default due to a payment default and the indenture trustee determines that the issuing entity’s assets will not be sufficient on an ongoing basis to make all payments on the notes as the payments would have become due if the maturity dates of the notes had not been accelerated, the indenture trustee may sell the issuing entity’s assets for an amount less than the aggregate outstanding principal amount of the notes with the consent of the holders of a majority of the outstanding principal amount of the notes. In such event, the proceeds from the sale of the issuing entity’s assets may not be sufficient to pay all of the notes in full.

Risk of loss or delay in payment may result from delays in the transfer of servicing due to the servicing fee structure

Because the servicing fee is structured as a percentage of the principal balance of the contracts, the amount of the servicing fee payable to the servicer may be considered insufficient by potential replacement servicers. Due to the reduction in the servicing fee as a result of the decline in the principal balance of the contracts, it may be difficult to find a replacement servicer. Consequently, the time it takes to effect the transfer of servicing to a replacement servicer under such circumstances may result in delays and/or reductions in the interest and principal payments on your notes.

Commingling of collections could result in reduced payments to you

If it meets certain conditions set forth in the sale and servicing agreement, the servicer may hold collections it receives from the obligors on the contracts with its own funds until the day prior to the next date on which distributions will be made on the notes. If the servicer does not pay these amounts to the issuing entity when required to do so, the issuing entity may be unable to make the payments owed on your notes. In the event the servicer were to become a debtor in a bankruptcy case, the issuing entity may not have a perfected security interest in these collections. In either case, you may suffer losses on your investment.

The payment priorities increase the risk of loss or delay in payment to certain classes of notes

Unless the notes have been accelerated following an event of default, the issuing entity will pay principal of the notes sequentially (and pro rata between the Class A-2a notes and the Class A-2b notes based on their respective outstanding principal amounts) until each class of notes has been paid in full. In all cases, the issuing entity will pay principal of the Class A-1 notes before any other notes. If the notes have been accelerated following an event of default, the issuing entity will not pay principal of the Class A-2

 

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notes, the Class A-3 notes and the Class A-4 notes sequentially; instead, the issuing entity will pay principal of each class of the Class A-2 notes, the Class A-3 notes and the Class A-4 notes, pro rata, based on their outstanding principal amounts, after the Class A-1 notes are paid in full. See “Payments to the Noteholders—​Distributions” in this prospectus.

The sequential payment of principal of the notes means that the classes of notes having later payment rights are more likely to suffer the consequences of delinquent payments and defaults on the contracts than the classes of notes having earlier principal payment rights. See “Payments to the Noteholders—​Distributions” in this prospectus.

If a bankruptcy court determines that the transfers of contracts from the seller to the depositor or from the depositor to the issuing entity were not true sales, or if a conservator or receiver were appointed for Eaglemark Savings Bank, then payments on the contracts could be delayed resulting in losses or delays in payments on your notes

If the seller or the depositor were to become a debtor in a bankruptcy case, creditors of that party, or that party acting as debtor-in-possession, may assert that the transfer of the contracts was ineffective to remove the contracts from that party’s estate, because the transfer was in substance a secured loan rather than a sale. In that case, the distribution of payments on the contracts to the issuing entity might be subject to the automatic stay provisions of the United States Bankruptcy Code. This would delay payments on your notes for an uncertain period of time. Furthermore, reductions in payments under the contracts to the issuing entity may result if the bankruptcy court were to rule in favor of the creditors or the debtor-in-possession. In either case, you may experience delays or reductions in payments on your notes. In addition, a bankruptcy trustee would have the power to sell the contracts if the proceeds of the sale could satisfy the amount of the loan deemed owed by the seller or the depositor, as the case may be. The bankruptcy trustee could also substitute other collateral in lieu of the contracts to secure the loan. Additionally, the bankruptcy court could adjust the debt if the seller or the depositor were to file for reorganization under Chapter 11 of the United States Bankruptcy Code. Any of these actions could result in losses or delays in payments on your notes. The seller will represent and warrant that its conveyance of the contracts is a valid sale and transfer of the contracts. See “Legal Aspects of the Contracts—Certain Bankruptcy Considerations”.

If Eaglemark Savings Bank becomes insolvent, is in an unsound condition, materially violates its bylaws or regulations, or engages in similar activity, the Federal Deposit Insurance Corporation (the “FDIC”) could be appointed as conservator or receiver for Eaglemark Savings Bank. In a receivership or conservatorship of Eaglemark Savings Bank, the FDIC as receiver or conservator could, among other things, repudiate the transfer of contracts to the seller. FDIC regulations limit the FDIC’s potential use of any of its repudiation powers in the context of securitization transactions, so long as certain conditions are satisfied. Sales of contracts pursuant to the bank sale and participation agreement between Eaglemark Savings Bank and the seller are effected on a daily basis in the ordinary course of business of Eaglemark Savings Bank. Eaglemark Savings Bank sells all of its right, title and interest in each contract to the seller. Both Eaglemark Savings Bank and the seller treat each transfer of a contract as an absolute sale to the seller, without recourse, and each transfer is accounted for as a “sale” under generally accepted accounting principles (“GAAP”). The seller will determine which contracts are to be included in the transfers to the depositor and the issuing entity. Since the seller is not itself an FDIC-insured bank, the transfers will not be structured to fall under any of the FDIC’s regulations or safe harbors.

If the FDIC were to take the position that FDIC regulations, or other statutory or regulatory requirements applicable to the transactions, were not satisfied or otherwise applied to the transfers of the contracts from Eaglemark Savings Bank to the seller, the FDIC, as conservator or receiver, might attempt to repudiate or disaffirm the bank sale and participation agreement and limit claims of the issuing entity for such repudiation to “actual direct compensatory damages”. In addition, the issuing entity could be stayed from enforcing its security interest or exercising any control over the contracts without the consent of the FDIC for a period of 45 days (in the case of a conservatorship) or 90 days (in the case of a receivership), and the FDIC may require the issuing entity to go through the administrative claims procedure established by the FDIC in order to establish its rights to payments on the contracts.

Applicable law does not define “actual direct compensatory damages”. However, these damages do not include damages for lost profits or opportunity, and no damages would be paid for the period after the date

 

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of the appointment of the FDIC as conservator or receiver. The FDIC could delay its decision whether to recognize Eaglemark Savings Bank’s transfer of the contracts for a reasonable period following its appointment as conservator or receiver. Additionally, the issuing entity could be limited to seeking recovery based upon the obligation of the seller to repurchase contracts for which it did not have good and marketable title. Any of these actions could result in losses or delays in payments on your notes. See “Legal Aspects of the Contracts—Bank Insolvency”.

If a bankruptcy court decides to consolidate the assets and liabilities of the depositor and the seller, payments on the contracts could be delayed, resulting in losses or delays in payments on the notes

If the seller were to become a debtor in a bankruptcy case, a creditor or the seller acting as debtor-in-possession could request a bankruptcy court to order that the seller’s assets and liabilities be substantively consolidated with the depositor’s assets and liabilities. If the bankruptcy court consolidated the assets and liabilities of the seller and the depositor, delays and possible reductions in the amounts of payments on your notes could occur. See “Legal Aspects of the Contracts—Certain Bankruptcy Considerations”.

Repurchase obligations of the depositor and the seller provide you only limited protection against prior liens on the contracts

Federal or state law may grant liens on the contracts that have priority over the issuing entity’s interest. If the creditor associated with any prior lien on a contract exercises its remedies, the cash proceeds from the contract and related financed motorcycle available to the issuing entity will be reduced. In that event, there may be a delay or reduction in payments to you. An example of a lien arising under federal or state law is a tax lien on property of the seller or depositor arising prior to the time a contract is conveyed to the issuing entity. Such a tax lien would have priority over the interest of the issuing entity in the contracts. In addition, a mechanic’s lien could arise based upon work done on a financed motorcycle. In any such event, unless and until the depositor or seller repurchases the contract as a result of breaches of representations or warranties, payments could be delayed or reduced.

The seller will represent and warrant to the depositor, and the depositor will represent and warrant to the issuing entity, that there are no prior liens on the contracts (except for certain permitted liens). The seller will also represent and warrant to the depositor, and the depositor will represent and warrant to the issuing entity, that it will not grant any lien on the contracts. If those representations and warranties are not true as to any contract and the breach materially and adversely affects the issuing entity’s interest in the contract, the depositor will be obligated to repurchase the contract from the issuing entity and the seller will be required to repurchase the contract from the depositor. There can be no assurance that the depositor or the seller will be able to repurchase a contract at the time when it is required to do so. In addition, there are certain types of liens the existence of which would not constitute a breach of the representations or warranties of the seller or the depositor.

Because the offered notes are in book-entry form, your rights can only be exercised indirectly

Because the offered notes will be issued in book-entry form, you will be required to hold your interest in the notes through The Depository Trust Company (“DTC”) in the United States, or Clearstream, Luxembourg (“Clearstream”) or the Euroclear System (“Euroclear”) in Europe. Transfers of interests in the offered notes must therefore be made in accordance with the rules and operating procedures of those systems. So long as the offered notes are in book-entry form, you will not be entitled to receive a physical note representing your interest. The offered notes will remain in book-entry form except in the limited circumstances described under the caption “Description of the Notes and the Indenture—Certain Information Regarding the Notes—Book-Entry Registration” and “—Issuance of Definitive Notes” in this prospectus. Unless and until the offered notes cease to be held in book-entry form, you will only be able to exercise the rights of noteholders indirectly through DTC, if in the United States, and its participating organizations, or Clearstream or Euroclear, in Europe, and their participating organizations. See “Description of the Notes and the Indenture—Certain Information Regarding the Notes—Noteholder Communication” and “—Book-Entry Registration”. Holding the offered notes in book-entry form could also limit your ability to pledge your notes to persons or entities that do not participate in DTC, Clearstream or Euroclear and to take other actions that require a physical note.

 

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Interest on and principal of the offered notes will be paid by the issuing entity to DTC as the holder of record of the notes while they are held in book-entry form. DTC will credit payments received from the issuing entity to the accounts of its participants which, in turn, will credit those amounts to noteholders either directly or indirectly through indirect participants. This process may delay your receipt of principal and interest payments from the issuing entity.

The issuing entity will issue floating rate notes, but the issuing entity will not enter into any interest rate swaps or caps and you may suffer losses on your fixed rate notes or your floating rate notes if interest rates rise

The contracts owned by the issuing entity bear interest at a fixed rate while the floating rate notes will bear interest at a floating rate based on 30-day average SOFR (or the applicable benchmark) plus the spread. Even though the issuing entity will issue floating rate notes, it will not enter into any interest rate swaps or caps or other derivative transactions in connection with the issuance of the notes.

If the floating rate payable by the issuing entity is substantially greater than the fixed rate received under some or all of the contracts because market interest rates rise or other conditions change materially after the issuance of the notes, the issuing entity may not have sufficient funds to make payments on the notes, and you may experience delays or reductions in the interest and principal payments on your notes.

The issuing entity will make payments on the floating rate notes out of its generally available funds—​not solely from funds that are dedicated to the floating rate notes. Therefore, an increase in the amount of interest payable on the floating rate notes as a result of an increase in 30-day average SOFR (or the applicable benchmark) would reduce the amounts available for distribution to holders of all notes, not just the holders of the floating rate notes.

SOFR is a relatively new reference rate, which could have an adverse effect on the floating rate notes

“SOFR” is published by the Federal Reserve Bank of New York (the “FRBNY”), and is intended to be a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities. The FRBNY notes on its publication page for SOFR that use of SOFR is subject to important limitations and disclaimers, including that the FRBNY may alter the methods of calculation, publication schedule, rate revision practices or availability of SOFR at any time without notice. The FRBNY only began to publish compounded averages of SOFR in March 2020.

As of the closing date, the floating rate notes will accrue interest based on 30-day average SOFR, which for each interest period will be based on the average of the SOFR rates for the preceding 30 calendar days, compounded daily on business days. Because 30-day average SOFR is based on an average of daily compounded SOFR rates, the 30-day average SOFR rate on the calculation date may not be the same as the daily rates in effect on the calculation date. At any time that the benchmark is 30-day average SOFR, the administrator, in its sole discretion, will have the ability to make any SOFR adjustment conforming changes, and holders of the notes will not have any right to approve or disapprove of these changes and will be deemed to have waived and released any and all claims against any transaction party relating to any such changes.

Because SOFR is published by the FRBNY based on data received from other sources and depends on interrelated economic, financial and political considerations, none of the transaction parties will have any control over its determination, calculation or publication. We cannot assure you that SOFR will not be discontinued or fundamentally altered in a manner that is materially adverse to the interests of investors in the floating rate notes or the other notes. If the manner in which SOFR is calculated is changed or if SOFR is discontinued, that change or discontinuance may result in a reduction of or an increase in the amount of interest payable by the issuing entity on the floating rate notes and may reduce the price at which the floating rate notes or the other classes of notes could be sold in the secondary market.

Because SOFR is a relatively new rate, the floating rate notes may not have an established trading market when issued, and an established trading market may never develop or may not be liquid. The secondary market for, and the market value of, the floating rate notes will be affected by a number of factors, including the manner in which SOFR is determined, calculated and published, the development of SOFR-based market conventions, broad acceptance of SOFR in the capital markets, the anticipated and actual level

 

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and direction of interest rates, the variable rate of interest payable on the floating rate notes, potential volatility of SOFR, the time remaining to the maturity of the floating rate notes, the principal amount of the floating rate notes and the availability of comparable instruments. Investors in the floating rate notes may not be able to sell such notes at all or may not be able to sell such notes at prices that will provide them with a yield comparable to similar investments that have a developed secondary market, and may consequently suffer from increased pricing volatility and market risk.

The FRBNY began to publish SOFR in April 2018. Although the FRBNY has also published historical indicative SOFR going back to 2014, such prepublication historical data inherently involves assumptions, estimates and approximations. Investors should therefore not rely on any historical changes or trends in SOFR as an indicator of the future performance of SOFR during the term of the floating rate notes. Historical interest rates are not necessarily indicative of future interest rates and actual interest rates may be lower than anticipated.

In addition, market participants may not consider SOFR a suitable replacement or successor for all of the purposes for which U.S. dollar LIBOR historically has been used (including, without limitation, as a representation of the unsecured short-term funding costs of banks), which may lessen market acceptance of SOFR. Any failure of SOFR to gain market acceptance could adversely affect the return on and value of the floating rate notes and the price at which investors can sell the floating rate notes in the secondary market. In addition, if SOFR does not prove to be widely used as a benchmark in securities that are similar or comparable to the floating rate notes, the trading price of the floating rate notes may be lower than those of securities that are linked to rates that are more widely used. Similarly, market terms for floating rate debt securities linked to SOFR, such as the spread over the base rate reflected in interest rate provisions or the manner of compounding the base rate, may evolve over time, and trading prices of the floating rate notes may be lower than those of later-issued SOFR-based debt securities as a result. Investors in the floating rate notes may not be able to sell the floating rate notes at all or may not be able to sell the floating rate notes at prices that will provide them with a yield comparable to similar investments that have a developed secondary market, and may consequently suffer from increased pricing volatility and market risk.

Investors in the floating rate notes should carefully consider the foregoing uncertainties prior to purchasing those notes. In general, events related to SOFR and alternative reference rates may adversely affect the liquidity, market value and yield of the floating rate notes.

Changes to or elimination of SOFR or benchmark determinations made by the administrator may adversely affect the floating rate notes

The FRBNY publishes SOFR based on data received by it from sources other than the calculation agent, the sponsor, the depositor or the issuing entity, and none of the calculation agent, the sponsor, the depositor or the issuing entity has control over the FRBNY’s calculation methods, publication schedule, or rate revision practices or the availability of SOFR at any time. There can be no guarantee, particularly given its relatively recent introduction, that SOFR will not be discontinued or fundamentally altered in a manner that is materially adverse to the interests of investors in the floating rate notes or any other class of notes. If the manner in which SOFR is calculated is changed, that change may result in a reduction in the amount of interest payable on the floating rate notes and the trading prices of the floating rate notes.

In addition, in certain circumstances, as described under “Description of the Notes and the Indenture—​Calculation of Floating Rate Interest—Effect of Benchmark Transition Event”, if the administrator has determined prior to the relevant reference time that a benchmark transition event and its related benchmark replacement date have occurred, the benchmark may cease to be based upon 30-day average SOFR and may instead be based upon the applicable benchmark replacement.

If the administrator determines that a benchmark transition event and its related benchmark replacement date have occurred in respect of 30-day average SOFR then the interest rate of the floating rate notes will no longer be determined by reference to 30-day average SOFR, but instead will be determined by reference to the benchmark replacement. The alternative rate of interest on the floating rate notes will be determined pursuant to a prescribed order described under “Description of the Notes and the Indenture—​Calculation of Floating Rate Interest—Effect of Benchmark Transition Event”. In addition, the terms of the floating rate notes expressly authorize the administrator to make benchmark replacement conforming

 

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changes if appropriate. If a particular benchmark replacement or related benchmark replacement adjustment cannot, in the sole discretion of the administrator, be determined (including because such benchmark replacement or related benchmark replacement adjustment is deemed not to be administratively feasible), then the next-available benchmark replacement or related benchmark replacement adjustment will apply.

The determination of a benchmark replacement, the calculation of the interest rate on the floating rate notes by reference to a benchmark replacement (including the application of a benchmark replacement adjustment), any implementation of benchmark replacement conforming changes and any other determinations, decisions or elections that may be made under the terms of the floating rate notes in connection with a benchmark transition event, could adversely affect the value of the floating rate notes, the return on the floating rate notes and the price at which floating rate noteholders can sell such floating rate notes.

Additionally, the issuing entity cannot anticipate how long it will take to develop the systems and processes necessary to adopt a specific benchmark replacement, which may delay and contribute to uncertainty and volatility surrounding any benchmark transition.

The administrator will have significant discretion with respect to certain elements of the benchmark determination process and benchmark replacement process, including making any SOFR adjustment conforming changes, determining whether a benchmark transition event and its related benchmark replacement date have occurred, determining which related benchmark replacement is available, determining the earliest practicable index determination date for using the related benchmark replacement, determining related benchmark replacement adjustments (if not otherwise determined by the applicable governing bodies or authorities) and making related benchmark replacement conforming changes (including potential changes affecting the business day convention and index determination date). Holders of the notes will not have any right to approve or disapprove of these changes or determinations and will be deemed to have waived and released any and all claims against any transaction party relating to any such changes or determinations. If the administrator, in its sole discretion, determines that an alternative index is not administratively feasible, including as a result of technical, administrative or operational issues, then such alternative index will be deemed to be unable to be determined as of such date. The administrator may determine an alternative to not be administratively feasible even if such rate has been adopted by other market participants in similar products and any such determination may adversely affect the return on the floating rate notes and the trading market and the value of the floating rate notes.

The issuing entity cannot predict if SOFR will be eliminated, or, if changes are made to SOFR, the effect of those changes. In addition, the issuing entity cannot predict what alternative index would be available or chosen, should this occur. If SOFR in its current form does not survive or if an alternative index is chosen, payments on, and the market value and/or liquidity of, the floating rate notes could be adversely affected.

A decrease in SOFR would reduce the rate of interest on the floating rate notes

The interest rate on the floating rate notes will initially be based on a spread over a benchmark, which initially will be 30-day average SOFR, which is based on compounded SOFR; however, under certain circumstances described herein, the benchmark may be changed to an alternative benchmark.

Changes in SOFR or any benchmark replacement will affect the rate at which the floating rate notes accrue interest and the amount of interest payments on the floating rate notes. Any decrease in 30-day average SOFR or any benchmark replacement will lead to a decrease in the floating rate notes interest rate. If the benchmark is below 0.00% for any interest period, the negative value of the benchmark will be used for determining the rate at which the floating rate notes accrue interest for such interest period; provided, however, that the interest rate on the floating rate notes for any interest period will not be less than 0.00%. A negative benchmark could result in the interest rate applied to the floating rate notes decreasing to 0.00% for the related interest period.

Risks relating to the contracts and the related motorcycles

Future delinquency and loss experience of the contracts may be worse and more volatile than the servicer’s historical experience

Presented in this prospectus is historical delinquency and loss experience and other information for the portfolio of prime and non-prime contracts originated indirectly by the seller and serviced by the servicer,

 

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consisting primarily of contracts relating to the retail purchase of new or used motorcycles purchased in the United States and manufactured by Harley-Davidson. See “Delinquency and Loan Loss Information” in this prospectus. Static pool information in respect of certain of the sponsor’s prior securitized pools of prime-only contracts is set forth in Annex II to this prospectus. However, the actual delinquency and loss experience and other information for the contracts transferred to the issuing entity could be substantially worse and more volatile than as presented in such historical information. HDCC believes Harley-Davidson Financial Services, Inc.’s retail credit losses may increase over time due to changing consumer credit behavior and new financing programs that may result in different loan performance than Harley-Davidson’s existing loan products. See “—Risks relating to macroeconomic, regulatory and other external factors—The sponsor’s business and Harley-Davidson’s business could be negatively impacted by a pandemic such as the Coronavirus (“COVID-19”) pandemic” and “—The servicer’s discretion over the servicing of the contracts may impact the amount and timing of funds available to make payments on the notes” below.

If there are changed circumstances, which may include decisions made by Harley-Davidson with respect to new vehicle production, or by Harley-Davidson and/or its independent dealers with respect to pricing and incentives and inventory and sales practices relating to new or used motorcycles, in each case that result in a material decline in the value of Harley-Davidson motorcycles, those circumstances or any related decline in resale values for Harley-Davidson motorcycles would result in reduced recoveries on repossessed motorcycles. Negative changes in general business, economic or market factors may have an additional adverse impact on repossessed motorcycle values. Furthermore, a deterioration in economic conditions could adversely affect the ability and willingness of obligors to meet their payment obligations under the contracts. As a result, you may not receive interest and principal payments on your notes in the amounts and at the times you expect and the issuing entity may not have sufficient funds to pay all of the classes of notes in full.

The servicer’s discretion over the servicing of the contracts may impact the amount and timing of funds available to make payments on the notes

The servicer has discretion in servicing the contracts, including the ability to grant payment extensions and to determine the timing and method of collection and liquidation procedures as described in “The Sponsor, Seller, Servicer and Administrator—Servicing and Collections” and “Description of the Transfer and Servicing Agreements” in this prospectus. The manner in which the servicer exercises that discretion could have an impact on the amount and timing of the issuing entity’s receipt of collections from the contracts. If servicing procedures do not maximize the receipts from the contracts, you may experience losses or delays in payment on your notes.

The servicer may permit an extension on payments due on contracts on a case-by-case basis or as part of a program offering. Any of these extensions may extend the maturity of the contracts and increase the weighted average life of the notes. The weighted average life and yield on your notes may be adversely affected by extensions on the contracts. However, the servicer will be required to purchase the contract from the issuing entity if it extends the term of the contract beyond the latest final scheduled maturity date for the notes. The servicer may permit extensions as part of a program or promotion for reasons that benefit the seller or the servicer and these extensions may not benefit you as a noteholder. The servicer will be entitled to retain any fees that an obligor pays to receive an extension. In response to the COVID-19 pandemic, the servicer temporarily offered payment relief options to customers impacted by the COVID-19 pandemic in the form of payment extensions. The servicer does not currently offer the payment relief options implemented in response to the COVID-19 pandemic, though it is possible that the servicer could implement such programs in the future to address similar economic impacts from a pandemic or similar global event.

It is possible that failures to repossess financed motorcycles from defaulting obligors, recalls of Harley-Davidson models, or various factors, including the sale of financed motorcycles repossessed from defaulting obligors, may result in less than a full recovery of amounts due

The servicer generally exercises its right to sell a motorcycle securing a defaulted contract after repossession. There is no assurance that a motorcycle will be successfully repossessed. Further, the amount of proceeds that the servicer receives from the sale of a repossessed motorcycle (net of expenses of the sale) may be less than the outstanding principal balance of the defaulted contract as of the date of the sale of

 

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the motorcycle. The prices of used motorcycles, including the prices at which the servicer is able to sell repossessed motorcycles, are variable and are subject to declines which may result in increased credit losses on defaulted motorcycles.

Harley-Davidson periodically conducts motorcycle recalls which could include temporary suspensions of sales and production of one or more Harley-Davidson models. Such recalls could result in market concerns over actual or perceived quality, safety or reliability of Harley-Davidson motorcycles. This could result in a decline in resale values of used Harley-Davidson motorcycles as well as demand for used Harley-Davidson motorcycles and could have a negative effect on amounts realized on recoveries of repossessed motorcycles, which could result in losses on the notes. Additionally, a recalled used motorcycle may be serviced to address and cure the defects responsible for triggering the recall, which could cause delays in the disposition of a repossessed motorcycle subject to the recall, including delays in Harley-Davidson’s ability to realize any proceeds or recoveries relating to the motorcycle, which could result in losses on the notes.

During the second quarter of 2022, Harley-Davidson received information from a third-party supplier concerning a regulatory compliance matter relating to the supplier’s component part. As a result, out of an abundance of caution, Harley-Davidson suspended all vehicle assembly and shipments (excluding LiveWire® models) for approximately two weeks during the second quarter of 2022. Harley-Davidson continues to work through the regulatory compliance matter with its relevant suppliers and the regulatory agency. While at this time Harley-Davidson does not expect that this matter will result in a material recall, it is possible that a material recall could be required.

Additionally, certain factors triggered by strategic actions by Harley-Davidson relating to inventory of used motorcycles and introduction of new models may depress the prices at which repossessed motorcycles may be sold and/or may delay the timing of these sales.

Limitations on enforceability of security interests in the financed motorcycles may hinder the issuing entity’s ability to realize the value of the financed motorcycles

State law limitations on the enforceability of security interests and the manner in which a secured party may dispose of collateral may limit or delay the issuing entity’s ability to obtain or sell the financed motorcycles. See “—Risks relating to macroeconomic, regulatory and other external factors—The sponsor’s business and Harley-Davidson’s business could be negatively impacted by a pandemic such as the Coronavirus (“COVID-19”) pandemic” below. In particular, some jurisdictions require that the obligor be notified of the default and be given a period of time within which it may cure the default prior to or after repossession. This could reduce or delay the availability of funds to make payments on your notes.

Early defaults on contracts may adversely affect your notes

Financing options resulting in a contract having an initial principal balance in excess of the retail price of a motorcycle may increase the risk that the amount of any related sales proceeds would not be sufficient to satisfy the outstanding principal balance of the contract. For a further discussion of certain promotional financing programs and potential risks associated therewith, see “—Potential losses on the notes are likely to be higher for contracts originated under promotional financing programs or if there are excessive prepayments or defaults on contracts with higher contract interest rates” below.

Due to these and other factors, it is highly likely that the principal balance of the contracts will exceed the value of the related motorcycles, particularly during the earlier years of those contracts’ terms. Defaults during these earlier years are likely to result in losses because the net proceeds of repossession are likely to be less than the full amount of principal and interest owed on those contracts. In addition, the frequency and severity of losses may be greater for contracts with longer terms, because those contracts tend to have a greater incidence of delinquencies and defaults and because the slower rate of amortization of the principal balance of a longer term contract may result in a longer period during which the value of the motorcycle that secures the contract is less than the remaining principal balance of the contract. As a result, the proceeds received by the issuing entity upon any repossession and sale of motorcycles that secure the contracts may not be sufficient to pay the full amount owed under the related contracts. You could suffer a loss if the

 

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proceeds available from repossession or other realization on a motorcycle are not sufficient to pay the amount owed under the related contract and available credit enhancement for losses on the contracts is insufficient.

Paid-ahead simple interest contracts may affect the weighted average life of the notes

Because the contracts are simple interest contracts, if an obligor makes a payment on the contract ahead of schedule, the weighted average life of the notes could be affected. This is because the additional payment on a contract that is already current may be applied to reduce, at least in part, the principal balance of the related contract. Obligors may not be required to make any scheduled payments during the period for which the contract was paid ahead. During this period, interest will continue to accrue on the contract principal balance, but the contract will not be considered delinquent. Furthermore, when an obligor resumes the required payments, they may be insufficient to cover the interest that has accrued since the last payment by that obligor.

Generally, paid-ahead payments shorten the weighted average lives of the notes when the paid-ahead amount is applied to the payment of principal of the notes; however, in certain circumstances the weighted average lives of the notes may be extended. In addition, liquidation proceeds will be applied first to reimburse any advances made by the servicer. Therefore, to the extent the servicer makes advances on a paid-ahead simple interest contract which subsequently goes into default, the loss on this contract may be larger than would have been the case had advances not been made.

The seller’s portfolio of contracts has historically included simple interest contracts that have been paid-ahead by one or more scheduled monthly payments. We cannot predict the number of contracts which may become paid-ahead contracts or the amount of scheduled payments which may be paid ahead.

Potential losses on the notes are likely to be higher for contracts originated under promotional financing programs or if there are excessive prepayments or defaults on contracts with higher contract interest rates

Certain contracts contain promotional financing terms offered by Eaglemark Savings Bank. Certain of these financing terms may increase the risk of potential losses on such contracts. For example, a contract may have been originated without requiring the obligor to make a down payment on the purchase price of the motorcycle. As a result, if an obligor elects to make no down payment under such a program, the principal balance of such contract will be higher than would have been the case had the obligor made a down payment on the purchase price of the motorcycle. Accordingly, the principal balance of the related contract relative to the value of the motorcycle will be greater than would have been the case had the obligor made a down payment. In addition, an obligor who has not paid any of his or her own funds for the purchase of a motorcycle may be more likely to default. The frequency and severity of losses on such contracts are generally higher than the frequency and severity of losses on contracts in which the obligor made a down payment on the purchase price of the motorcycle.

In addition, a contract may provide that the first payment is deferred for a specified period. The deferral period for the first payment generally may be up to 120 days. See “The Contracts—Criteria for Selecting the Contracts” in this prospectus. The obligor on a contract with a deferred first payment is entitled to use the motorcycle during the deferral period. Accordingly, the value of the motorcycle may be reduced during the deferral period without any reduction of the principal balance of the related contract. Thus, on the date on which the first payment is due on a contract with a deferred first payment, the principal balance of the contract relative to the value of the motorcycle will be greater than would have been the case had the first payment on the contract not been deferred. The frequency and severity of losses on contracts with a deferred first payment will depend, in part, on the length of the deferral period and may be higher than the frequency and severity of losses on contracts without a deferred first payment.

Additionally, some of the contracts will have contract interest rates that are less than the interest rate on your notes plus various fees. Excessive prepayments and defaults on contracts with higher contract interest rates may adversely affect your notes by reducing the amounts available to make interest and principal payments on the notes.

The yield supplement overcollateralization amount takes into account the concentration of low interest rate contracts, however, higher rates of prepayments of contracts with higher contract interest rates will

 

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decrease the amount available to cover delinquencies and defaults on the contracts and may decrease the amounts available to be deposited in the reserve account if the yield supplement overcollateralization amount is not sufficient to cover the lower overall contract interest rates due to prepayments.

You may experience reduced returns on your investment due to prepayments on or acceleration of the contracts, repurchases of the contracts, liquidations of defaulted contracts and early repayment of the notes

A higher than anticipated level of prepayments of the contracts or liquidations of defaulted contracts may cause the issuing entity to pay principal of your notes sooner than you expected. Also, the issuing entity may pay principal of your notes sooner than you expected if the depositor repurchases, or the servicer purchases, contracts from the issuing entity. In addition, upon the occurrence of certain events of default, your notes may be accelerated and the contracts sold, resulting in an early repayment of principal of your notes. You may not be able to reinvest the principal paid to you at yields that are equivalent to the yields on your notes; therefore, the ultimate return you receive on your investment in the notes may be less than the return you expected.

The contracts owned by the issuing entity may be prepaid or accelerated, in full or in part, voluntarily or as a result of defaults, or for other reasons. The depositor may repurchase contracts in certain circumstances. For example, the depositor will be required to repurchase a contract if the servicer determines in good faith that the representation and warranty of the seller and the depositor with regard to compliance with applicable law may have been violated with respect to such contract, and that amendment of the terms of such contract could better ensure compliance with applicable laws and regulatory guidance. The depositor will be required to repurchase a contract from the issuing entity if a breach of its representations and warranties relating to that contract materially and adversely affects the issuing entity’s interest in such contract and the depositor may be required to repurchase a contract based on the servicer’s determination that it may have breached its representation and warranty relating to compliance with consumer lending laws. In either of those events, the seller will be obligated to repurchase the contract from the depositor. In addition, the servicer may be required to purchase contracts from the issuing entity if it breaches certain servicing obligations relating to those contracts as specified in the sale and servicing agreement and such breach materially and adversely affects the issuing entity’s interest in such contract. The servicer may purchase all remaining contracts (and related assets) from the issuing entity when the pool balance of the contracts owned by the issuing entity is less than 10% of the initial pool balance.

We cannot fully predict the extent to which prepayments on the contracts by the related obligors will shorten the life of the notes. The rate of prepayments on the contracts may be influenced by a variety of economic, social and other factors including:

•

changes in obligor behavior;

​

•

the level of interest rates;

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•

the level of casualty losses; and

​

•

the overall economic environment.

​

We cannot assure you that prepayments on the contracts held by the issuing entity will conform to any historical experience. We cannot predict the actual rates of prepayments that will be experienced on the contracts. You will bear all reinvestment risk resulting from prepayments on the contracts and the corresponding acceleration of payments on your notes. See “Weighted Average Lives of the Notes” in this prospectus.

Interests of other persons in the contracts or the financed motorcycles could reduce the funds available to make payments on your notes

A person could acquire an interest in a contract that is superior to those of the issuing entity and the indenture trustee. The seller’s accounting records and computer systems will be marked to reflect the sales of the contracts to the depositor and the issuing entity (and the pledge of the contracts to the indenture trustee), but the servicer (or a third-party service provider acting on behalf of the servicer) will retain possession and control of the contracts. The paper contracts will not be marked to indicate that they have been sold to the issuing entity or pledged to the indenture trustee. The electronic contracts will be marked to

 

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indicate that they have been sold to the issuing entity but will not be marked to indicate that they have been pledged to the indenture trustee. In order to protect the issuing entity’s ownership interest and the indenture trustee’s security interest in the contracts, the depositor will file UCC-1 financing statements with the appropriate governmental authorities to give notice of the issuing entity’s ownership of, and the indenture trustee’s security interest in, the contracts.

A majority of the contracts are originated electronically or will otherwise be classified as “electronic chattel paper” under the Uniform Commercial Code. As described under “The Sponsor, Seller, Servicer and Administrator—Electronic Contracting” in this prospectus, Eaglemark Savings Bank, HDCC, the depositor, and the issuing entity originate, transfer, store, and maintain custody of these contracts in electronic form through one or more third-party hosts’ technology systems (the “e-contracts system”). The e-contracts system is designed to satisfy the Uniform Commercial Code’s requirements for “control” of electronic chattel paper (within the meaning of §9-105 of the Uniform Commercial Code).

The sale and servicing agreement will obligate the servicer to maintain the perfection of the issuing entity’s ownership interest in the contracts, but the authoritative copies of the electronic contracts may not be transmitted to or maintained by the issuing entity. If a person purchases or takes a security interest in contracts, for value in the ordinary course of its business, and obtains possession of the paper contracts, or obtains control of the electronic contracts, without actual knowledge that the purchase violates the rights of the issuing entity, that person will acquire an interest in the contracts superior to the interests of the issuing entity and the indenture trustee. In that event, some or all of the collections on the contracts may not be available to make payments on the notes.

The issuing entity and the indenture trustee could lose possession of a paper contract or control over an electronic contract through fraud, forgery, negligence or error (or, in the case of electronic contracts, as a result of a computer virus or a weakness in or failure of the e-contracts system). There can be no assurance that the e-contracts system will perform as represented to the servicer in maintaining the systems and controls required to provide assurance that the servicer maintains control over an electronic contract. In that event, there may be delays in obtaining copies of the electronic contract or confirming ownership and control of the electronic contract. There is a risk that the e-contracts system employed to maintain control of the electronic contracts may be insufficient under applicable law to give the issuing entity an interest in the electronic contracts that is perfected by control.

A person could also acquire an interest in a financed motorcycle that is superior to those of the issuing entity and the indenture trustee because of the failure to identify the issuing entity as the secured party on the related certificate of title. The seller will assign its security interests in the financed motorcycles to the depositor, and the depositor will assign its security interests in the financed motorcycles to the issuing entity. The seller’s assignment to the depositor and the depositor’s subsequent assignment to the issuing entity are subject to state vehicle registration laws. These registration laws generally require that the secured party’s name appear on the certificate or similar registration of title in order for the secured party’s security interest to be perfected. To facilitate servicing and reduce administrative costs, the servicer (or a third-party service provider acting on behalf of the servicer) will continue to hold the certificates of title for the financed motorcycles (where state law provides for lienholders to do so) and will not endorse or otherwise amend the certificates of title to identify the issuing entity as the new secured party. In most states, the issuing entity, as assignee of a contract, will have the benefits of the first-priority security interest in the related financed motorcycle obtained by Eaglemark Savings Bank, even though the issuing entity is not listed on the certificate of title as a secured party. However, the issuing entity may not have a perfected security interest in the financed motorcycles in certain states because the certificates or similar registrations of title will not be amended to reflect the assignment of the security interests in the financed motorcycles to the issuing entity. If the issuing entity does not have a perfected security interest in a financed motorcycle, its ability to realize on the financed motorcycle following an obligor default would be adversely affected. In addition, because the issuing entity will not be identified as the secured party on any certificate of title or similar registration of title, the security interest of the issuing entity in the motorcycles may be defeated through fraud, forgery, negligence or error.

In addition, the holders of some types of liens, such as tax liens or mechanics liens, may have priority over the issuing entity’s security interest in the financed motorcycles. The issuing entity also may lose its security interest in a financed motorcycle that is confiscated by the government.

 

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In the event that the issuing entity must rely upon repossession and sale of the financed motorcycle securing a defaulted contract to recover amounts due on the defaulted contract, the issuing entity’s ability to realize upon the financed motorcycle would be limited by the failure to have a perfected security interest in the financed motorcycle or the existence of a senior security interest in the financed motorcycle. In this event, you may be subject to delays in payment and may incur losses on your investment in the notes as a result of defaults or delinquencies by obligors. See “Legal Aspects of the Contracts—Security Interests” in this prospectus.

Bankruptcy of one or more obligors may reduce or delay collections on the contracts, and the sale of financed motorcycles relating to defaulting obligors may be delayed or may not result in complete recovery of amounts due

Bankruptcy and insolvency laws may increase the risk of loss on the contracts of obligors who become subject to bankruptcy proceedings. Those laws could result in the write-off of contracts of bankrupt obligors or result in delay in payments due on the contracts. For example, if the obligor becomes bankrupt or insolvent, the issuing entity may need the permission of a bankruptcy court to obtain and sell its collateral. As a result, you may be subject to delays in receiving payments, and you may also suffer losses if available credit enhancement for losses is insufficient. See “Legal Aspects of the Contracts—Certain Bankruptcy Considerations”.

Contracts that fail to comply with consumer protection laws may be unenforceable, which may result in losses on your investment

The contracts are consumer contracts subject to many federal and state consumer protection laws. If any of the contracts do not comply with one or more of these laws, the servicer may be prevented from or delayed in collecting amounts due on the contracts. If that happens, unless and until the depositor or seller repurchases the contract as a result of breaches of representations or warranties, payments on the notes could be delayed or reduced. See “Legal Aspects of the Contracts—Consumer Protection Laws” in this prospectus.

Each of the depositor and HDCC will make representations and warranties relating to the contracts’ compliance with law and the enforceability of the contracts. If there is an uncured breach of any of these representations or warranties that materially and adversely affects the interests of the issuing entity in the related contract, the issuing entity’s sole remedy will be to require the depositor and HDCC to repurchase the affected contract.

Risks relating to macroeconomic, regulatory and other external factors

The sponsor’s business and Harley-Davidson’s business could be negatively impacted by a pandemic such as the Coronavirus (“COVID-19”) pandemic

The global outbreak of COVID-19 led to restrictions on the level of economic activity around the world, including in the United States. The spread of COVID-19 also led to supply chain destabilization, facility closures, workforce disruption, consumer and manufacturing price increases (including as a result of inflation) and volatility in the global economy and capital markets, which adversely impacted and may again impact access to capital, the cost of capital and overall liquidity levels. Measures to address the impact of a pandemic such as the COVID-19 pandemic could have significant adverse impacts on domestic and foreign economies of uncertain severity and duration, and neither the seller nor the depositor is able to determine or predict to what extent these factors would affect the performance of the obligors on the contracts. The United States economy experienced a recession following the outbreak of the COVID-19 pandemic and could experience volatility in the capital markets or a recession following the outbreak of a future pandemic, which may adversely affect the performance and market value of the notes. There may be increased delinquencies and losses on the contracts as a result of the COVID-19 pandemic or any other pandemic, which could impact obligors nationwide. Because there is no recent precedent for the mitigation efforts undertaken by the federal government, through stimulus payments, and by the sponsor during the recent COVID-19 pandemic, it is possible that the sponsor’s most recent historical loss and delinquency experience will not accurately predict the performance of the contracts. See also “—Risks relating to the contracts and the related motorcycles—Future delinquency and loss experience of the contracts may be worse than the servicer’s historical experience”.

 

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A pandemic such as the COVID-19 pandemic, or a resurgence of the COVID-19 pandemic, could result in a portion of the obligors on the contracts becoming ill, losing their jobs, experiencing reductions in wages or seeking protection under bankruptcy or debtor relief laws. Obligors may prioritize payment obligations other than their contracts if they experience, or anticipate experiencing, a loss in wages, a job loss or an unexpected increase in expenses. The impact of a pandemic may cause the servicer to experience lower recovery values, slowed repossessions and delayed consumer payments. Consequently, payments on the notes could be adversely affected.

Federal, state or local governments have enacted and could enact additional laws, regulations, executive orders or other guidance that allow obligors to stop making scheduled payments on certain obligations for some period of time, require modifications to certain obligors’ contracts (e.g., waiving accrued interest), or preclude creditors from exercising certain rights or taking certain actions with respect to collateral securing such obligations, including repossession or liquidation of financed motorcycles. These and other restrictions could adversely affect the timing and amount of payments on the contracts and the performance and market value of the notes.

A pandemic, such as the COVID-19 pandemic, may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those related to the ability of obligors to make timely payments on the contracts, used motorcycle values, the performance, market value, credit ratings and secondary market liquidity of your notes, and risks of geographic concentration of the obligors.

The sponsor’s business could be negatively impacted by climate-related legislation and regulation, and the physical effects of climate change

Climate change-related legislation and regulation (including laws which may adversely impact the auto industry in particular as a result of efforts to mitigate the factors contributing to climate change) could impact the sponsor and Harley-Davidson and the actions each takes to respond to climate change concerns. The precise implications of those actions, as well as future efforts, are uncertain.

The sponsor’s and Harley-Davidson’s reputations may also be adversely affected by current and/or future public perception of the greenhouse gas emissions of its petroleum-powered vehicles. A negative change in public opinion could expose the sponsor and Harley-Davidson to potential adverse consequences to their business operations and financial condition.

Any of those effects or their confluence could adversely affect the performance of the contracts, the market value of the motorcycles securing the contracts, the credit rating of the sponsor or Harley-Davidson or the ability of the sponsor to honor its commitment to repurchase contracts due to breaches of representations or warranties, and, as servicer, to service the contracts or purchase contracts due to a breach of servicing obligations, which could result in losses on your notes.

The risks of climate change described above may exacerbate other risks disclosed in this section. For more information, see “—Social, economic and other factors, including adverse events in states with substantial concentrations of obligors, may cause increased defaults and delinquencies”, “—Future delinquency and loss experience of the contracts may be worse and more volatile than the servicer’s historical experience”, and “—Economic developments may adversely affect the performance and market value of your notes and may limit your ability to resell your notes”.

Economic developments may adversely affect the performance and market value of your notes and may limit your ability to resell your notes

If general economic conditions worsen, increases in unemployment, decreases in home values, changes in the credit cycle, increases in the rate of inflation and a lack of available credit could lead to increases in delinquencies and default rates, as well as decreased consumer demand for motorcycles, that may adversely affect the performance and market value of your notes.

In particular, factors such as inflation rates and consumer perceptions of the economy may lead to declining values of motorcycles securing outstanding contracts, which would weaken collateral coverage and increase the amount of losses in the event of defaults by the related obligors. Additionally, increases in unemployment have generally led to increased delinquencies and default rates in past recessions. See “—Risks

 

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relating to the contracts and the related motorcycles—Future delinquency and loss experience of the contracts may be worse than the servicer’s historical experience” above.

Further, if the recent increase in consumer debt levels continues or if consumers suffer financial hardship, including in connection with inflation or a financial crisis in the United States, delinquencies and losses on the contracts may increase, which could result in losses on your notes. In addition, normalized underwriting standards in the wake of past financial crises in the United States have caused increased delinquencies by obligors on retail contracts, and those conditions may cause additional increases in delinquencies. An increase in delinquencies could create concerns among investors in asset-backed securities as to increased defaults by obligors, thereby decreasing liquidity and demand for your notes.

United States and world economic and political conditions, including acts or threats of terrorism and/or war, could adversely affect payments on the notes

Events affecting the domestic and global financial markets, the ongoing military conflict between Russia and Ukraine and the global sanctions that have been instituted as a result of the conflict, could result in economic weakness in the United States and could contribute to instability in global financial markets, which in turn could significantly impact volatility, liquidity and/or the market value of securities, including the notes.

Additionally, threatened hostilities with other countries, political unrest and instability in the United States and around the world, continuing threats of terrorist attacks, as well as any actual armed hostilities, and any future terrorist attacks in the United States or abroad, could also have an adverse impact on the U.S. economy, global financial markets and payments and collections on the contracts, which could adversely affect payments on the notes.

You should consider the possible effects of the above on the delinquency, default and prepayment experience of the contracts. For example, sanctions implemented in connection with the conflict between Russia and Ukraine have had and may continue to have an inflationary impact on consumer goods, which may result in increased delinquency and loss experience relating to obligors and reduce amounts available for distribution on the notes. Additionally, U.S. military operations as a result of the conflict between Russia and the Ukraine or otherwise could increase the number of citizens who are in active military service, including persons in reserve status who are called to active duty. Under the Servicemembers Civil Relief Act, obligors who are members of the military on active duty, including reservists who are called to active duty after the origination of their contracts, may be entitled to reductions in interest rates to 6% and a stay of foreclosure and similar actions. We cannot provide information as to the number of contracts that the Servicemembers Civil Relief Act may impact. If an obligor’s obligation to make payments is reduced, adjusted or extended, the servicer will only be required to advance accrued interest with respect to contracts that were 30 days or more delinquent at the end of the related due period, assuming 30-day months, and only to the extent the servicer believes that such amounts will ultimately be recoverable through collection. Any resulting shortfalls in interest or principal will reduce the amount available for distribution on the notes.

The Servicemembers Civil Relief Act also limits the ability of the servicer to repossess the financed motorcycle securing a contract during the related obligor’s period of active duty and, in some cases, may require the servicer to extend the maturity of the contract, lower the monthly payments and readjust the payment schedule for a period of time after completion of the obligor’s military service. As a result, there may be delays in payment and increased losses on the contracts.

For more information regarding the effect of the Servicemembers Civil Relief Act and similar state laws, you should refer to “Legal Aspects of the Contracts—Other Considerations” in this prospectus.

Social, economic and other factors, including adverse events in states with substantial concentrations of obligors, may cause increased defaults and delinquencies

Economic conditions in states or U.S. territories where obligors reside may affect the delinquency, loan loss and repossession experience of the issuing entity with respect to the contracts. A variety of social and economic factors may affect the performance by obligors including, but not limited to, interest rates, unemployment levels, energy prices, the rate of inflation, public health concerns and consumer perceptions

 

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of economic conditions generally. However, neither the seller nor the depositor is able to determine or predict whether or to what extent economic or social factors will affect the performance by any obligors.

If adverse events or economic conditions were particularly severe in one or more states where there is a substantial concentration of obligors, the amount of delinquent payments and defaults on the contracts may increase. As a result, the overall timing and amount of collections on the contracts may differ from what you expect, and you may experience delays or reductions in payments.

The following are the approximate percentages of the initial pool balance consisting of contracts whose obligors were located in the following states (based on the billing address of the related obligor):

•

10.32% in California;

​

•

9.30% in Texas; and

​

•

6.80% in Florida.(1)

​

(1)

As of the cutoff date, the remaining states or geographic areas (including the District of Columbia and U.S. military bases) accounted for approximately 73.58%* of the initial pool balance, and none of these remaining states or geographic areas (including the District of Columbia and U.S. military bases) accounted for more than 5.00% of the initial pool balance.

​

*

Percentages may not add to 100.00% because of rounding.

​

For a breakdown of the pool of contracts by geographic distribution as of the cutoff date, see “The Contracts” in this prospectus.

Regional factors, including earthquakes, floods, hurricanes, wildfires, unemployment, changes in governmental rules or fiscal policies or terrorist acts, may increase the delinquency or loss experience of the contracts. For example, obligors located in California are more likely to be affected by certain hazards (such as earthquakes or widespread fires) than obligors located in other parts of the country, and the occurrence of a natural disaster in California may increase the delinquency or loan loss experience of the contracts related to obligors located in California. In addition, obligors located in coastal states such as Florida are more likely to be affected by hurricanes than obligors located in other parts of the country. Hurricanes can cause extensive and catastrophic physical damage in and to coastal and inland areas, including uninsured damage to motorcycles. In addition, there have been predictions that climate change may lead to an increase in the frequency of natural disasters and extreme weather conditions, with certain states bearing a greater risk of the adverse effects of climate change, which could increase the risks related to geographic concentration in the pool. The damage caused by extreme weather conditions, and the national, regional and local economic and other effects of that damage, may increase the delinquency or loan loss experience of the contracts related to the affected obligors.

Local and regional economic factors also impact the delinquency and loss experience of the contracts. For example, a substantial downturn in the financial services industry, which is highly concentrated in the states of New York, New Jersey and Connecticut, in the automotive or steel industries, which are concentrated in the states of Michigan, Ohio and Pennsylvania, or in the oil and gas industry, which is concentrated in the states of Texas, Oklahoma, Alaska, Louisiana and North Dakota, may reduce the income of obligors in those states and ultimately may reduce the related obligors’ ability to make timely payments on their contracts.

The notes may not be a suitable investment for investors subject to the EU Securitization Rules or the UK Securitization Rules

None of the originator, HDCC, the depositor or any other party to the transactions described in this prospectus intends, or is required under the transaction documents, to retain a material net economic interest in the securitization constituted by the issuance of the notes and the certificate, or to take any other action, in a manner that would satisfy the requirements of the EU Securitization Rules or the UK Securitization Rules.

 

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In particular, no such person undertakes to take any action, or refrain from taking any action, prescribed or contemplated in, or for purposes of, or in connection with, compliance by any investor with any requirement of, the EU Securitization Rules or the UK Securitization Rules.

In addition, the arrangements described under “Summary of Terms—Credit Risk Retention” above and under “The Sponsor, Seller, Servicer and Administrator—Credit Risk Retention” in this prospectus have not been structured with the objective of ensuring compliance with the requirements of the EU Securitization Rules or the UK Securitization Rules by any person.

Failure by an affected investor to comply with any applicable EU Securitization Rules or UK Securitization Rules with respect to an investment in the notes may result in the imposition of a penalty regulatory capital charge on that investment or of other regulatory sanctions and remedial measures. Consequently, the notes may not be a suitable investment for investors who are subject to the EU Securitization Rules or the UK Securitization Rules. As a result, the price and liquidity of the notes in the secondary market may be adversely affected.

Prospective investors are responsible for analyzing their own legal and regulatory position and are advised to consult with their own advisors regarding the suitability of the notes for investment and compliance with the EU Securitization Rules and the UK Securitization Rules.

Legislative and regulatory actions against the rating agencies could have an adverse effect on your ability to resell your notes

The hired rating agencies have been and may continue to be under scrutiny by federal and state legislative and regulatory bodies. Such scrutiny, as well as any actions such legislative and regulatory bodies may take as a result, may have an adverse effect on your ability to resell your notes.

Risks relating to the transaction parties

The conflict of interest created by the sponsor’s payment of fees charged by the rating agencies for their rating services may affect the ratings of your notes, as well as other functions that the rating agencies perform relating to the notes

The sponsor has hired two rating agencies and will pay them a fee to assign ratings on the notes. SEC regulations define as a conflict of interest the arrangement where, as is the industry standard and the case with the ratings of the notes, the sponsor pays the fees charged by the rating agencies for their rating services. This conflict of interest may affect the ratings that rating agencies hired by the sponsor assign to the notes and other functions that the rating agencies perform relating to the notes. The rating agencies that the sponsor hired to rate the notes may revise or withdraw the ratings at any time, including as a result of a failure by the sponsor or the depositor to provide such rating agencies with information requested by the rating agencies or to comply with any of their respective obligations contained in the engagement letters with such rating agencies. For example, if the sponsor fails to make available to any non-hired NRSRO any information provided to any rating agency that the sponsor hired to rate the notes for the purpose of assigning or monitoring the ratings on the notes, a rating agency that the sponsor hired to rate the notes could withdraw its ratings on the notes, which could adversely affect the market value of your notes and/or limit your ability to resell your notes. Potential investors in the notes are urged to make their own evaluation of the creditworthiness of the contracts and the credit enhancement on the notes, and not to rely solely on the ratings on the notes.

Adverse events with respect to the seller, the servicer or their affiliates may affect the timing of payments on your notes or have other adverse effects on your notes

Adverse events with respect to HDCC, as the seller or the servicer, or its affiliates may result in servicing disruptions or reduce the market value of your notes. Adverse financial or operational developments with respect to the servicer could result in lower service levels relating to the contracts, including a reduction of collection activity, which could lead to an increase in delinquencies and credit losses. In the event of a termination and replacement of the servicer, there may be some disruption of the collection activity with respect to delinquent contracts and therefore delinquencies and credit losses could increase. The seller may be

 

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required to repurchase certain contracts that do not comply with representations and warranties made by it (for example, representations relating to the compliance of the contracts with applicable laws), and the servicer may be required to purchase contracts if it breaches certain servicing obligations with respect to those contracts. If the seller or servicer is unable to purchase any of such contracts and make the related payment to the issuing entity, investors could suffer losses.

In addition, adverse financial or operational developments with respect to sellers and servicers in asset-backed securities transactions or their affiliates have in some cases resulted in a reduction in the market value of the related asset-backed securities. HDCC is an indirect wholly-owned subsidiary of Harley-Davidson, Inc. Although Harley-Davidson, Inc. is not guaranteeing the obligations of the issuing entity, to the extent Harley-Davidson, Inc. faces financial or operational difficulties, such events may reduce the market value of Harley-Davidson motorcycles. A material decline in values of Harley-Davidson motorcycles would result in reduced recoveries on repossessed motorcycles. Because all of the contracts relate to Harley-Davidson motorcycles, such a circumstance could result in losses or delays in payment of your notes.

A security breach or a cyber-attack affecting HDCC could adversely affect HDCC’s business, results of operations and financial condition, which could have an adverse effect on your notes

HDCC collects and stores certain personal and financial information from customers, employees, and other third parties. Security breaches or cyber-attacks involving HDCC’s systems or facilities, or the systems or facilities of HDCC’s service providers, could expose HDCC to a risk of loss of personally identifiable information of customers, employees and third parties or other proprietary or competitively sensitive information, business interruptions, regulatory scrutiny, actions and penalties, litigation, reputational harm, a loss of confidence, and other financial and non-financial costs, all of which could potentially have an adverse impact on HDCC’s future business with current and potential customers, results of operations and financial condition and could adversely affect HDCC’s ability to service the contracts and perform its other obligations under the transaction agreements, which could have an adverse effect on your notes. In addition, while remote work arrangements, which offer employees the flexibility to regularly work remotely rather than “in office” and were formalized by HDCC through its “virtual-first” policy as of the first fiscal quarter of 2020, have been accompanied by increases in cyber-security protections, additional cyber-security risks related to the “virtual-first” policy could arise on an ongoing basis.

HDCC and its service providers rely on encryption and other information security technologies licensed from third parties to provide security controls necessary to help in securing online transmission of confidential information pertaining to customers, employees and other aspects of HDCC’s business. Advances in information system capabilities, new discoveries in the field of cryptography or other events or developments may result in a compromise of the environment that HDCC or its service providers use to protect sensitive data. A party who is able to circumvent HDCC’s security measures by methods such as hacking, fraud, trickery or other forms of deception could misappropriate proprietary information or cause interruption in HDCC’s operations. HDCC may be required to expend capital and other resources to protect against such security breaches or cyber-attacks or to remediate problems caused by such breaches or attacks on its own systems or the systems of its service providers. HDCC’s security measures are designed to protect against security breaches and cyber-attacks, but HDCC’s failure to prevent such security breaches and cyber-attacks could subject HDCC to liability, decrease HDCC’s profitability and damage HDCC’s reputation. Even if a failure of, or interruption in, HDCC’s systems or facilities is timely resolved or an attempted cyber incident or other security breach is successfully avoided or thwarted, it may require HDCC to expend substantial resources or to take actions that could adversely affect customer satisfaction or behavior and expose HDCC to reputational harm.

HDCC could also be subjected to cyber-attacks that could result in slow performance and loss or temporary unavailability of HDCC’s information systems. Information security risks have increased because of new technologies, the use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists, and others. HDCC may not be able to anticipate or implement effective preventative measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources.

 

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The occurrence of any of these events could have a material adverse effect on HDCC’s business, reputation, results of operations and financial condition, could adversely affect HDCC’s ability to service the contracts and perform its other obligations under the transaction agreements, and could have an adverse effect on your notes.

The seller, the servicer and their affiliates must comply with governmental laws and regulations that are subject to change and uncertainty and could involve significant costs

HDCC, as the seller and the servicer of the contracts, and its affiliates are governed by various foreign, federal and state laws that specifically affect general financial and lending institutions. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) significantly affects the financial services industry, including consumer lending and securitization of financial assets. The financial services industry generally, and securitization markets in particular, are subject to increased regulation, such as disclosure and other obligations, as well as restrictions on pricing and enforcement proceedings.

For example, regulations implementing the Dodd-Frank Act require securitizers or originators to retain an economic interest in a portion of the credit risk for any asset that they securitize or originate. The Dodd-Frank Act also gives broad powers to the SEC to regulate credit rating agencies and their activities and created the Consumer Financial Protection Bureau (the “CFPB”), which has extensive rulemaking and enforcement authority over consumer finance businesses. The CFPB has broad regulatory, supervisory and enforcement authority over entities offering consumer financial services or products, including non-bank companies, such as HDCC (“Covered Entities”). The CFPB examines Covered Entities for compliance with consumer financial protection laws. As part of this authority, the CFPB’s examinations could result in enforcement actions, regulatory fines and mandated changes to HDCC’s business, products, policies and procedures. Given the fact that a single director leads the CFPB and the director is subject to at-will removal by the President of the United States of America, the strategic direction and priorities of the CFPB can be subject to volatile swings upon changes in the presidential administration.

Additionally, the CFPB, the Federal Trade Commission and the Department of Justice have pursued various enforcement actions against lenders involving significant penalties, consent orders, cease and desist orders, and similar remedies that, if applicable to HDCC and the products, services and operations of the nature offered by HDCC, may require the cessation or alteration of certain business practices, which could have a material adverse effect on our financial condition and results of operations.

The CFPB has conducted fair lending examinations and investigations of vehicle financiers and their dealer participation policies and other compensation practices. Although the impact of CFPB oversight on the business of HDCC and its affiliates remains uncertain, the CFPB continues to monitor, examine, and regulate the fair lending practices of vehicle finance providers. In March 2013, the CFPB issued a bulletin stating that indirect auto lenders may be liable for violations under the Equal Credit Opportunity Act based on dealer-specific and portfolio-wide disparities on a prohibited basis. However, on May 21, 2018, a resolution approved by Congress under the Congressional Review Act was signed into law, which repealed the CFPB’s fair lending guidance contained in the bulletin and prohibits the future enactment of a similar rule without Congressional approval. The impact of the repeal of this guidance on fair lending enforcement at the CFPB is uncertain.

The CFPB has successfully asserted the power to investigate and bring enforcement actions directly against securitization vehicles. On December 13, 2021, in an action brought by the CFPB, the U.S. District Court for the District of Delaware denied a motion to dismiss filed by a securitization trust by holding that the trust is a “covered person” under the Dodd-Frank Act because it engages in the servicing of loans, even if through servicers and subservicers. CFPB v. Nat’l Collegiate Master Student Loan Trust, No. 1:17-cv-1323-SB (D. Del.). On February 11, 2022, the district court granted the defendant trust’s motion to certify that order for immediate appeal and stayed the case pending resolution of any appeal. On April 29, 2022, the U.S. Court of Appeals for the Third Circuit granted the defendant trust’s petition for permission to appeal and formally docketed the appeal as No. 22-1864. There is no timeline for the U.S. Court of Appeals for the Third Circuit to decide the case, and, because the appeal presents two separate controlling questions of law, no assurance can be given that the U.S. Court of Appeals for the Third Circuit will address the “covered person” issue discussed above in its decision. While the district court did not decide whether the trust could be held liable for the conduct of the servicer at this stage of the case, the CFPB could make that

 

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argument if the case is ultimately allowed to proceed. Depending on the outcome of the appeal, the CFPB may rely on this decision as precedent in investigating and bringing enforcement actions against other trusts, including the issuing entity, in the future.

Additionally, the Dodd-Frank Act gives the FDIC authority to act as receiver of certain financial companies and their affiliates in specific situations under the Dodd-Frank Act’s orderly liquidation authority provisions. No assurances can be given that these provisions would not apply to HDCC or its affiliates, including the depositor and the issuing entity, or, if they were to apply, would not result in a repudiation of any agreement to which the entity in receivership was a party, or in the recovery of any contracts transferred under any such agreement. Application of these provisions (including regulations which the FDIC may adopt in the future) could result in delays in payments on the notes or in reductions of amounts available to make payments on the notes. See “Legal Aspects of the Contracts—Dodd-Frank Act Orderly Liquidation Authority Provisions” in this prospectus.

Compliance with applicable law can be costly and can affect operating results because new forms, processes, procedures, controls and infrastructure can from time to time be required to comply with new requirements. Compliance can create operational constraints and place limits on pricing. The failure to comply could result in significant statutory civil and criminal penalties, monetary damages, attorneys’ fees and costs, possible revocation of licenses and damage to reputation, brand and valued customer relationships.

Many provisions of the Dodd-Frank Act are required to be implemented through rulemaking by the applicable federal regulatory agencies. Accordingly, the impact on the securitization market of any rules yet to be finalized or to become effective will not be known until the applicable agencies have completed their rulemaking and market participants have implemented the rules. Any such new regulations may have a significant adverse impact on the issuing entity, the depositor or HDCC, as sponsor, seller and/or servicer, including on the servicing of the contracts or on the regulation and supervision of HDCC and/or its affiliates generally, or on the price that a subsequent purchaser would be willing to pay for the notes.

Additionally, various federal and state governmental agencies have instituted and may in the future institute programs to assist consumers during an economic downturn. It is possible that any such programs and related legislation could affect an obligor’s contract, resulting in the reduction of an obligor’s obligations under their contract or the diminution of a creditor’s rights under a contract. If a significant number of contracts are impacted in this fashion, you may not receive interest and principal payments on your notes in the amounts and at the times you expect and the issuing entity may not have sufficient funds to pay all of the classes of notes in full.

 

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The Issuing Entity

General

Harley-Davidson Motorcycle Trust 2023-A is a statutory trust formed under the laws of the State of Delaware pursuant to a trust agreement between the depositor and the owner trustee for the purpose of entering into the transactions described herein. After its formation, the issuing entity will engage in only a limited set of activities. The issuing entity’s activities are limited to:

•

acquiring, holding and managing the contracts and the other assets of the issuing entity and proceeds therefrom;

​

•

issuing the notes and the certificate;

​

•

making payments on the notes and the certificate; and

​

•

engaging in other activities that are necessary, suitable or convenient to accomplish the foregoing purposes or that are incidental to or connected with the foregoing purposes.

​

The issuing entity may not engage in other activities and may not invest in other securities or make loans to anyone.

The trust agreement may be amended by the depositor and the owner trustee, without the consent of any of the noteholders or the certificateholder, to cure any ambiguity, to correct or supplement any provisions in the trust agreement, or to add any other provisions with respect to matters or questions arising under the trust agreement that are not inconsistent with the provisions of the trust agreement; provided, however, that any such action will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of any noteholder or the certificateholder.

The trust agreement may be amended from time to time by the depositor and the owner trustee, with the prior consent of one or more noteholders in the aggregate holding notes evidencing more than 50% of the aggregate outstanding principal amount of the notes and the certificateholder for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the trust agreement, or of modifying in any manner the rights of the noteholders or the certificateholder; provided, however, that no such amendment will, without the consent of the holders of all outstanding notes and certificates affected thereby:

•

increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on contracts or distributions required to be made for the benefit of the noteholders or the certificateholder, or

​

•

eliminate the requirement for certificateholder’s consent or reduce the percentage of the outstanding amount of the notes required to consent to any such amendment (as set forth in the trust agreement).

​

Prior to the execution of any such amendment or consent, the depositor will furnish written notification of the substance of such amendment or consent, together with a copy thereof, to the indenture trustee, the administrator and each rating agency hired by the sponsor to provide a rating on the notes.

Promptly after the execution of any amendment to the certificate of trust, the owner trustee will cause the filing of such amendment with the Delaware Secretary of State.

Prior to the execution of any amendment to the trust agreement or the certificate of trust, the owner trustee will be entitled to receive and rely upon an opinion of counsel stating that the execution of such amendment is authorized or permitted by the trust agreement. The owner trustee may, but will not be obligated to, enter into any amendment that affects the owner trustee’s own rights, duties or immunities under the trust agreement or otherwise.

Under the transfer and sale agreement between the seller and the depositor, the seller will sell all of the contracts and the related property to the depositor. Under the sale and servicing agreement among the issuing entity, the depositor, the servicer and the indenture trustee, the depositor will transfer all of the contracts and the related property to the issuing entity.

 

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The property of the issuing entity will consist of:

•

the contracts and the right to receive all payments received on the contracts after the cutoff date;

​

•

security interests in the financed motorcycles securing the contracts and any related property;

​

•

rights with respect to any repossessed financed motorcycles, including the right to receive proceeds from the sale of repossessed motorcycles;

​

•

the rights to proceeds from claims on theft, physical damage, credit life and disability insurance policies, protection products and debt cancellation agreements covering the financed motorcycles or the obligors;

​

•

rebates of premiums and other amounts, if applicable, relating to insurance policies, extended service contracts or other repair agreements and other items financed under the contracts;

​

•

the depositor’s rights against the seller under the transfer and sale agreement, pursuant to which the seller sold the contracts to the depositor;

​

•

the right to receive payments from the depositor for the repurchase of contracts which do not meet specified representations and warranties made by the depositor in the sale and servicing agreement;

​

•

rights against the servicer under the sale and servicing agreement, including the right to receive payments from the servicer for the purchase of contracts upon a breach of its servicing obligations relating to such contracts as specified in the sale and servicing agreement;

​

•

amounts held in the collection account, the distribution account and the reserve fund to be established and maintained under the sale and servicing agreement; and

​

•

all proceeds of the foregoing.

​

The servicer will have limited discretionary authority with respect to the contracts as described under “Description of the Transfer and Servicing Agreements—Servicing” in this prospectus. The servicer will also have the discretion to exercise a clean-up call as described under “Description of the Notes and the Indenture—​Optional Redemption” in this prospectus.

The issuing entity’s principal offices will be in Delaware, in care of Wilmington Trust, National Association, as owner trustee, at the address listed below under “The Trustees”. The fiscal year end of the issuing entity is December 31.

Capitalization

In addition to the notes, the issuing entity will issue a certificate having no principal balance. The certificate is not being offered by this prospectus. The holder of the certificate will be entitled to receive certain distributions from time to time as set forth under “Payments to the Noteholders—Distributions”. Initially, the certificate will be retained by the depositor.

The following table illustrates the aggregate outstanding principal balance of the pool of contracts as of the cutoff date and the initial balance of the reserve fund as of the closing date:

The following table illustrates the expected capitalization of the issuing entity as of the closing date:

 

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The amount shown for the certificate is the sum of the expected initial level of overcollateralization and the yield supplement overcollateralization amount as of the closing date. On each payment date, the holder of the certificate will be entitled to receive any amounts remaining after payment of all amounts due and owing on a payment date, including payments on the notes, have been made. The certificate is not being offered by this prospectus and will initially be retained by the depositor.

The Depositor

The depositor is Harley-Davidson Customer Funding Corp., a Nevada corporation and wholly-owned special-purpose finance subsidiary of HDCC. All of the officers and directors of the depositor are also employed by HDCC or HDFS, except that at least two directors of the depositor will at all times be independent of HDCC, HDFS and Harley-Davidson. The depositor’s business is limited to, among other things:

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purchasing the contracts and the related property (and other similar promissory notes and security agreements) from the seller;

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acting as the beneficial owner of the issuing entity and other similar trusts; and

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performing its obligations under the transfer and servicing agreements to which it is a party (as well as similar agreements entered into in connection with the formation of the issuing entity and similar trusts).

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Other than the obligation to obtain the consent of certain noteholders and the certificateholder with respect to amendments to the trust agreement, other consent rights given to the certificateholder, certain repurchase obligations under the sale and servicing agreement, and obligations to give notice upon knowledge of certain events of default, the depositor will have no ongoing duties with respect to the issuing entity.

The Sponsor, Seller, Servicer and Administrator

General

Harley-Davidson Credit Corp. (“HDCC”), a Nevada corporation, is the sponsor of the transaction and will act as seller and servicer of the contracts and administrator of the issuing entity. HDCC is a wholly-owned subsidiary of Harley-Davidson Financial Services, Inc. (“HDFS”). HDFS is a wholly-owned subsidiary and the financing division of Harley-Davidson, Inc.

HDCC began operations in January 1993 when it purchased the $85 million wholesale financing portfolio of certain Harley-Davidson® motorcycle dealers from ITT Commercial Finance; subsequently, HDCC entered the retail consumer finance business. HDCC and its affiliates provide retail financial services to consumers in the United States, U.S. territories and Canada and wholesale financial services to Harley-Davidson® motorcycle dealers in the United States and Canada.

Retail financial services include installment lending for retail purchases of new and used motorcycles manufactured by Harley-Davidson and other manufacturers (“applicable manufactured motorcycles”). Retail loans are originated primarily through Eaglemark Savings Bank, a Nevada thrift and wholly-owned subsidiary of the seller. Wholesale financial services include floorplan and open account financing for motorcycles and motorcycle parts and accessories.

Insurance and related services, including extended service agreements, property and casualty insurance and certain other insurance products, are provided to motorcycle consumers and dealers by Harley-Davidson Insurance Services, Inc., a wholly-owned subsidiary of HDFS that acts as a commission-based independent representative for various insurance companies.

HDCC’s and its affiliates’ retail financing and insurance programs are designed to work together as a package that appeals to the needs of consumers of applicable manufactured motorcycles and to provide a competitive advantage over HDCC’s and its affiliates’ competitors.

The sponsor began its asset-backed securities program and securitizing motorcycle contracts in 1994 and, to date, has securitized only contracts relating to the retail purchase of new and used applicable

 

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manufactured motorcycles and, to a limited extent, other retail consumer products. From the inception of its program through December 31, 2022, the sponsor securitized approximately $32.2 billion of motorcycle contracts in both public and private term asset-backed securitization transactions. For the fiscal year ended December 31, 2018, HDCC had no public term asset-backed securitization debt offerings, and for the fiscal years ended December 31, 2022, 2021, 2020, and 2019, HDCC securitized approximately $0.6 billion, $1.3 billion, $0.6 billion, and $0.6 billion, respectively, through public term asset-backed securitization debt offerings. In addition to selling receivables to trusts making registered public offerings and unregistered private offerings, HDCC securitizes retail motorcycle contracts with multi-seller asset-backed commercial paper conduits. HDCC obtains a majority of the receivables originated by Eaglemark Savings Bank, a Nevada thrift and FDIC-regulated and insured institution and a wholly-owned subsidiary of HDCC, and services all such receivables, including receivables sold in securitization. None of the asset-backed securitization transactions involving HDCC as sponsor has defaulted or experienced an early amortization.

HDCC has been servicing motorcycle contracts since 1993. As of December 31, 2022, the servicer serviced a portfolio of 461,587 retail contracts (both motorcycle contracts and other contracts including, but not limited to, aircraft contracts) with an aggregate outstanding balance of $6.7 billion. None of the asset-backed securitization transactions involving HDCC as servicer has defaulted or experienced an early amortization. HDCC believes that it has materially complied with its servicing obligations with respect to each asset-backed securitization transaction involving HDCC as servicer.

HDCC’s principal executive offices are located at 9850 Double R Blvd., Suite 200, Reno, NV 89521 (telephone 775-886-3000).

Credit Risk Retention

The risk retention regulations in Regulation RR require the sponsor, either directly or through its majority-owned affiliates, to retain an economic interest in the credit risk of the contracts. The depositor is a wholly-owned affiliate of the sponsor and will initially retain the required economic interest in the credit risk of the contracts to satisfy its requirements under Regulation RR (the “retained interest”). The depositor may transfer all or a portion of the retained interest to another majority-owned affiliate of the sponsor on or after the closing date.

The depositor’s retention of at least 5% of each class of notes and the residual interest satisfies the requirements for an “eligible vertical interest” under Regulation RR. The depositor, or another majority-owned affiliate of the sponsor, is required to retain this interest until the latest of:

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two years from the closing date;

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the date that the pool balance is one-third or less of the initial pool balance; and

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the date that the aggregate outstanding principal amount of the notes is one-third or less of the aggregate initial principal amount.

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None of the sponsor, the depositor or any majority-owned affiliate of the sponsor may hedge the retained interest during this period. If the percentage of each class of notes and the residual interest retained by the depositor on the closing date is materially different than 5%, HDCC will include the retained percentage in the first investor report following the closing date and in the Form 10-D for that month.

Each class of notes retained by the depositor as part of the “eligible vertical interest” will have the same terms as all other notes in that class, except that the notes retained by the depositor (or any other majority-owned affiliate of the sponsor) will not be included for purposes of determining whether a required percentage of any class of notes have taken any action under the indenture or any other transaction document as described in “Description of the Notes and the Indenture—Notes Owned by Transaction Parties”. For a description of the notes and the credit enhancement available for the notes, you should read “Description of the Notes and the Indenture—Credit Enhancement”.

Origination

The seller primarily purchases contracts from Eaglemark Savings Bank, a Nevada thrift and FDIC regulated and insured institution and a wholly-owned subsidiary of the seller. Eaglemark Savings Bank

 

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began originating retail motorcycle contracts in 2002. Eaglemark Savings Bank sells a majority of its loan originations on a daily basis to the seller pursuant to an agreement between Eaglemark Savings Bank and the seller (the “bank sale and participation agreement”) whereby Eaglemark Savings Bank receives an origination fee from the seller to originate the loans. If an originated contract is not retained by Eaglemark Savings Bank, the contract is instead transferred to the seller by the terms of the bank sale and participation agreement. As of December 31, 2022, Eaglemark Savings Bank had originated $3.7 billion of retail motorcycle contracts.

The forms of contracts used by Eaglemark Savings Bank are approved by the seller. Each contract purchased by the seller from Eaglemark Savings Bank is approved by the seller. All contracts transferred to the issuing entity are fully amortizing contracts with the portion of principal and interest thereof determined by the simple interest method. Each contract specifies a scheduled monthly payment amount and monthly payment due date, which are determined at the time of origination. The obligor generally may make a one-time election to change the monthly payment due date by a limited number of days from the original monthly due date. The length of a contract is determined by a number of factors, which may include the age and model of the motorcycle, the credit profile of the applicant(s), and the preference of the related obligor(s). Generally, each contract’s interest rate is determined on the basis of the credit history of the applicant(s), the collateral, the term of the contract, the amount of the down payment, and general market rates, in compliance with applicable banking laws at the time of origination. Interest rates offered to applicants may be based on a tiered pricing program which offers lower rates to applicants with stronger credit ratings. Eaglemark Savings Bank establishes wholesale interest rates, which are generally the lowest rates at which Eaglemark Savings Bank will finance a particular loan in a specific pricing tier. Eaglemark Savings Bank also imposes limits on the retail interest rate for each loan. If a consumer’s retail interest rate exceeds the wholesale interest rate by more than the limit established by Eaglemark Savings Bank, then Eaglemark Savings Bank will not fund the loan. With certain loans, primarily loans in the lowest credit tiers and some promotional loans, Eaglemark Savings Bank requires the retail interest rate to be the same as the wholesale interest rate.

The financing of a retail purchase of a motorcycle is generally initiated in conjunction with Harley-Davidson® and LiveWire® motorcycle dealerships. Eaglemark Savings Bank’s personnel contact motorcycle dealers and explain the available financing plans, terms, prevailing rates and credit and financing policies. Eaglemark Savings Bank offers promotional financing options to certain qualifying consumers in connection with the retail purchase of new or used Harley-Davidson and LiveWire® motorcycles. Such promotional financing options may include, but are not limited to, low rate financing, low- or no-down-payment financing, and deferred first payment financing, and combinations thereof. These options are offered primarily to applicants with stronger credit profiles only. Periodically, Harley-Davidson Motor Company coordinates with Eaglemark Savings Bank to provide limited availability marketing programs under which Harley-Davidson provides cash payments to Eaglemark Savings Bank to provide special-rate financing options to qualifying consumers, known as subvention programs. The subvented support payments are paid by Harley-Davidson Motor Company and do not constitute cashflow that is available to make payments on any notes.

If a motorcycle dealer and the dealer’s customer wish to use Eaglemark Savings Bank’s available financing for a retail purchase, a credit application will be submitted via an internet connection or via facsimile to Eaglemark Savings Bank. Alternatively, an applicant may choose to apply using the Eaglemark Savings Bank on-line application in advance of visiting a dealership. The credit application contains credit information about the applicant, which may include the applicant’s income, employment information, and other relevant personal information bearing on the decision to extend credit, as well as a description of the financed motorcycle that will secure the contract. A standard automated process requests a credit report for all applicants from up to two credit bureaus. Any resulting credit report is used in conjunction with the application information, the applicant’s historical performance specific to the servicer, and the applicant’s personal financial data to make a determination regarding the application. Credit application information is often verified independently, depending on the applicant’s determined credit risk.

Once a credit application has been approved by Eaglemark Savings Bank, the motorcycle dealer’s personnel will then explain the financing plans, terms, prevailing rates and credit and financing policies to the obligor.

 

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The terms of each contract grant to Eaglemark Savings Bank a security interest in the motorcycle that the obligor is financing and require the obligor to have Eaglemark Savings Bank, Eaglemark Savings Bank and/or its assigns, or HDCC noted as lienholder on the electronic lien or certificate of title for the motorcycle. Generally, it is the responsibility of the motorcycle dealer to ensure that contracts, and other documents to perfect the security interest in the motorcycle covered by the contract, are filed and recorded, or that the security interest is otherwise perfected. Eaglemark Savings Bank or HDCC, directly or through third-party collateral management service providers, verify lienholder accuracy, retain the title or the lienholder notification, and perform any necessary title maintenance to ensure continued perfection of the lien on the related motorcycle.

Each motorcycle dealer must execute an agreement with Eaglemark Savings Bank that, among other things, sets forth the guidelines and procedures applicable to the origination and purchasing process. These motorcycle dealer agreements generally provide for the purchase by the related motorcycle dealer of any contract for its outstanding principal balance, plus accrued but unpaid interest, if the representations and warranties made by the motorcycle dealer relating to the contract are breached. These representations and warranties generally relate to the origination procedures and criteria related to a contract and the security interest in the related financed motorcycle and not the collectability of the contract or the creditworthiness of the related obligor.

Underwriting

For all contract originations, each applicant’s (or applicants’) credit application is underwritten and approved or declined in accordance with Eaglemark Savings Bank’s underwriting guidelines, and such guidelines have been reviewed and approved by the seller. These underwriting guidelines are intended to assess the applicant’s ability to repay all amounts due under the contract, based upon a review of the information contained in the credit application, the credit bureau reports, other consumer investigative reports and servicer records, and the related financed motorcycle as collateral. Eaglemark Savings Bank uses custom credit scoring models, information from certain reports, including credit bureau reports, and internally developed decision rules to help objectively assess an applicant’s creditworthiness and to help Eaglemark Savings Bank quantify credit risk. The custom credit scoring models were developed, using a third-party provider, through statistical analysis of Eaglemark Savings Bank’s and HDCC’s consumer portfolio databases of contracts originated in recent years to identify key variables that predict an applicant’s likelihood of repayment. Scoring models are used to differentiate credit applicants and to statistically segment credit risk into categories based on likelihood of repayment. Using credit scoring models does not eliminate credit risk. Eaglemark Savings Bank considers both negative factors such as past due credit, repossessions, loans charged off by other lenders and previous bankruptcy, and also positive factors such as favorable payment history, the presence of accounts with lengthy credit history, and responsible utilization of revolving credit lines. The credit decision process considers multiple factors, which may include credit information, employment and residence stability, application information, income, the ratio of the monthly contract payment to income, collateral characteristics, and the terms of the contract. Eaglemark Savings Bank makes its final credit decision based upon the perceived degree of credit risk, its assessment of the obligor’s ability to repay the loan, the collateral, and the loan credit structure.

Credit applications are automatically evaluated and a majority are approved or declined based on an automated decisioning process in order to expedite the review of applications and allow Eaglemark Savings Bank to make and communicate underwriting decisions to dealers and consumers more quickly and efficiently than it otherwise would be able. The automated decisioning process approves or declines applications by applying the underwriting guidelines against data provided in the credit application, credit bureau reports, the servicer records, and consumer investigative reports using the custom credit scores and logic based on various combinations of credit factors that in Eaglemark Savings Bank’s experience have been predictive factors in credit performance. This automated review process evaluates key data elements, including but not limited to credit bureau attributes, external credit information, application information, income, the ratio of the monthly contract payment to income, loan and payment history with the servicer (if applicable), an internal custom credit score calculated from credit bureau data and a credit bureau score, and measures them against internally determined thresholds based on associated risk. Credit applications that are neither approved nor declined in the automated decisioning process are assigned to a credit analyst for further evaluation. Failure to be approved by the automated decisioning model does not mean that a credit

 

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application does not meet Eaglemark Savings Bank’s underwriting standards. Many high quality applications are evaluated and approved by a credit analyst although they were not approved by the automated decisioning process. While the same underwriting standards are used for the automated decisioning process and the manual underwriting process, circumstances can arise such that a contract meets the underwriting standards but is not identified and approved during the automated decisioning process. For example, applicants with a FICO®* score below 510 are not eligible for automatic approval although underwriting management may approve lower FICO® scores as part of the manual underwriting process, at which point a credit analyst is able to perform a manual review of the application against those aspects of the underwriting standards that the automated decisioning process is incapable of examining and considering. Automatic approvals and declinations are considered final decisions; however, declinations may be reconsidered if, for example, contract terms are satisfactorily modified to mitigate risks, and approvals may also be reconsidered if, for example, there has been a change to the underlying collateral. Eaglemark Savings Bank and the seller conduct periodic tests of their automated review process against their underwriting guidelines and monitor results monthly against expectations.

When an application is not automatically decisioned, it is forwarded to a credit analyst at Eaglemark Savings Bank for further review. A credit analyst’s credit authority is generally delineated by the amount of the loan to be approved, the total exposure of the applicant(s) (including the loan to be approved), and the internal custom credit score derived from the application. Authority levels are based on the experience and capability of the credit analyst. The credit analyst will compare the data provided by the applicant to what is available through the applicant’s credit report and, if applicable, payment and loan performance history with the servicer. For applications that do not meet specific credit bureau standards, validation of key application information is required, either through the automatic, systemic decisioning process or by the credit analyst. This validation is effected through third party sources or supplementary documents such as a paystub, a complete copy of an applicant’s tax return in the case of self-employed individuals, bank statements, proof of residency and other due diligence documents. When required under the credit guidelines, the credit analyst, or in certain cases automated processes, will verify the applicant’s income, employment and other applicant data and make a credit decision based on an assessment of the strengths and weaknesses of the application. If the loan to be approved exceeds a credit analyst’s credit authority, the application will be forwarded to a credit analyst with the appropriate credit authority for a final decision. Eaglemark Savings Bank and the seller conduct quality assurance reviews of both randomly selected and targeted contracts on a regular basis to ensure compliance with established underwriting guidelines, incorporating results into staff training and evaluations.

The process for underwriting an application depends primarily on the credit quality of the applicant(s). Automated credit decisions are based on quantitative analysis. Manual credit decisions include both qualitative and quantitative analysis. Underwriting guidelines are comprised of numerous evaluation criteria, including the applicant’s credit history, employment and residence stability, custom credit scores, the collateral characteristics, payment to income ratios, the terms of the contract and, in certain cases, the creditworthiness of a co-borrower.

A contract may have a term, not including an initial payment deferral period not exceeding 120 days, of up to 96 months. The principal balance financed under a contract may include the total amount of a motorcycle’s retail sales price plus the retail sales price of certain parts and accessories, MotorClothes® apparel and riding gear, sales tax and title and license fees, and first-year premiums (and, in certain limited instances, additional premiums) for motorcycle insurance, as well as premiums or fees for optional products such as extended service contracts, GAP coverage, planned maintenance, and credit life and disability insurance. For purchases of new and used motorcycles, applicants are generally required to make a down payment of 10% to 20% against the sales price. An applicant who makes a larger down payment may be eligible to receive a reduced interest rate. A down payment of less than 10%, or in certain circumstances no down payment, may be permitted for certain qualified applicants and/or during special marketing promotions. The seller’s financing options may result in a contract having an initial principal balance in excess of the manufacturer’s suggested retail price (“MSRP”) of the motorcycle. The maximum loan amount for each motorcycle is determined based upon the applicant’s creditworthiness and ability to repay. The maximum available financing for new motorcycles generally ranges from 85% to 150% of the sum of MSRP

*

FICO® is a federally registered servicemark of Fair Isaac Corporation.

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plus 10% of MSRP in order to account for motorcycle customization. The maximum available financing for used motorcycles generally ranges from 60% to 150% of the NADA average retail value. For the seller’s most qualified obligors, the maximum advance rate for both new and used motorcycle financing may be up to twelve percentage points higher in limited circumstances.

The underwriting decision is communicated to the motorcycle dealer via a secure internet connection or facsimile and to the applicant by the dealer, electronically or by mail, specifying approval, denial or a need for additional information on the proposed contract. Applicants applying online may also be notified of the underwriting decision via the internet at the time of submission. If the response requires stipulations to the approval, these are communicated to the motorcycle dealer and the applicant and become a condition of the approval. After approval, the motorcycle dealer will obtain the necessary documentation for funding review and verification, which may include the following:

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a promissory note and security agreement;

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proof that the applicant holds a valid driver’s license;

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proof of physical damage insurance;

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a bill of sale; and

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title paperwork,

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and deliver such documentation, together with a signed credit application, to Eaglemark Savings Bank.

Generally, the motorcycle dealer prepares the loan documentation using a proprietary system (DeallinkTM), which audits certain contract details, then generates and delivers to Eaglemark Savings Bank an image of the prepared documentation, and in most cases delivers an e-signed image. Alternatively, the motorcycle dealer generates the loan documentation using another system and Eaglemark Savings Bank will receive by mail, or by electronic transmission, the appropriate documentation from the motorcycle dealer. Upon receipt, the loan documents are prepared and scanned for imaging as required. The auto-generated or scanned loan documents are then audited by a contract verifier for completeness and consistency with the credit application and other contract details. Once the funding review and verification processes are completed and all requirements have been satisfied, the final approval for funding of the amount financed, including the appropriate dealer participation (which may be a flat fee, in instances where the dealer receives a fee, or an amount equal to a portion of the finance charge) or dealer discount and fees, if applicable, are transferred by Eaglemark Savings Bank to the motorcycle dealer.

The seller regularly makes a detailed analysis of its portfolio of contracts to evaluate the effectiveness of the underwriting guidelines. Eaglemark Savings Bank from time to time adjusts the underwriting guidelines to maintain the asset quality deemed acceptable, including an assessment of external economic factors, credit delinquencies and credit losses. The primary adjustments over the past several years have been new custom credit scoring models implemented in the first fiscal quarter of 2018, the installation of a new retail loan management system in the first fiscal quarter of 2019, and a new credit decision engine implemented in the first fiscal quarter of 2020. In response to changing economic conditions or portfolio performance, credit guidelines may be modified, including by, among other things, adjusting loan-to-value ratios, payment capacity measures, or contract rates, or by modifying contract terms for applicants in specific geographic regions and/or with specific credit risk profiles.

Electronic Contracting

A majority of the contracts are originated electronically. Eaglemark Savings Bank, through its parent, has contracted with a third party to facilitate the process of creating and storing those electronic contracts. The e-contract system permits transmission, storage, access and administration of electronic contracts and comprises proprietary and third-party software, hardware, network communications equipment, lines and services, computer servers, data centers, support and maintenance services, security devices and other related technology that enable electronic contracting in the vehicle industry. Through use of the e-contract system, Eaglemark Savings Bank originates promissory notes and security agreements and then transfers the electronic contracts to HDCC.

 

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The e-contract system uses a combination of technological and administrative features that are designed to: (i) designate a single copy of the record or records comprising an electronic contract as being the single authoritative copy of the contract; (ii) manage access to and the expression of the authoritative copy; (iii) identify the issuing entity as the owner of record of the authoritative copy; and (iv) provide a means for transferring record ownership of, and the exclusive right of access to, the authoritative copy from the current owner of record to a successor owner of record.

Individual Motorcycle Insurance

The terms of each contract require that, for the term of the contract, the motorcycle securing the contract is to be covered by physical damage insurance naming Eaglemark Savings Bank (and its successors and assigns) as a loss payee. In the transfer and sale agreement, the seller will represent and warrant that each obligor had obtained or agreed to obtain physical damage insurance covering the related motorcycle. However, the servicer performs no subsequent verification of continued insurance coverage and the seller will not be obligated to make payments to the issuing entity for any loss as to which insurance has not been maintained. Furthermore, there can be no assurance that an insurance company will make payments in respect of an insurance policy when it is obligated to do so.

Servicing and Collections

Pursuant to the sale and servicing agreement among the servicer, the issuing entity, the depositor and the indenture trustee, the servicer is responsible for administering, servicing, collecting and enforcing the contracts in accordance with its customary servicing practices. The servicer’s specific servicing policies and practices may change over time. The servicer’s customary servicing practices include, among others, responding to obligor inquiries, sending statements, completing account maintenance activities, investigating and initiating contact with obligors during early to late stage delinquency, including first payment defaults, the disposal of repossessed motorcycles, and the collection of deficiency balances on charged off accounts.

The servicer uses multiple technologies to provide customer service. For inbound calls from obligors, the servicer uses smart call routing to identify if the call is a collections or customer service call and to route that call to the appropriate department. The servicer may utilize text messaging contact strategies to reach customers of different risk levels with payment reminders and/or past due messaging. The servicer also maintains an escalations group to handle non-routine calls. Obligors generally have the ability to initiate payments for their own accounts through a secure on-line environment. The servicer encourages obligors to make payments electronically, including through direct debit, online payment methods or telephone payment. Obligors who do not pay electronically are instructed to send their monthly payments to the servicer’s lockbox location.

The servicer applies almost all payments that are received before the designated processing time on each business day to an obligor’s account on the day payment is received. By the end of the next business day, the servicer researches, matches and applies most payments that do not include adequate information to identify the correct account for payment application. The remaining small number of payments that have not been matched to an account are researched and resolved with a payment application shortly thereafter. If a payment is applied to an obligor’s account but is later reversed, or if a misapplied payment is reversed or corrected, an account may have negative collections for the period. The servicer’s collection efforts include identifying the level of risk of a delinquent obligor using tools that include a custom behavior score, stage of delinquency and account balance, and prioritizing collection efforts based on that risk level. The custom behavior scoring model assesses the probability of payment default for each account and implements collection efforts based on its determination of the credit risk of the obligor on the payment due date. Variables considered by the model include obligor account history and account payment history. The model’s results guide the servicer to determine how soon an obligor is contacted after a payment is missed, allowing the servicer to prioritize collection efforts and improve and make more efficient the utilization of its resources in such collections.

Delinquent obligors with a high level of risk may be contacted by the servicer’s personnel (or a third-party vendor) using a predictive dialer as early as two days past due and may be contacted on a regular basis thereafter; customer permissions are obtained, as appropriate, for contact by mobile phone. Lower risk delinquent obligors may be contacted later in delinquency. The servicer’s general approach is to

 

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attempt to establish a repayment plan with the obligor of a delinquent contract as opposed to repossessing the related motorcycle; however, the servicer takes a risk-based approach with respect to a specific obligor, which includes both quantitative and qualitative factors such as the obligor’s responsiveness and ability to pay.

The servicer makes reasonable efforts to collect on delinquent contracts and to keep contracts current. Repossession is based on analysis of risk factors and is utilized as the servicer deems appropriate to minimize loss; timing varies by circumstance. Self-help repossession is the method used by the servicer in most cases and usually is accomplished by using a vendor service to secure possession of the financed motorcycle. Some jurisdictions provide the obligor with reinstatement or redemption rights. Legal requirements, particularly in the event of bankruptcy or in cases where the obligor may have protections under the Servicemembers Civil Relief Act, may limit the servicer’s ability to repossess or dispose of the repossessed motorcycle. Upon repossession and after any prescribed waiting period, the repossessed motorcycle is reconditioned, as deemed appropriate, then generally sold at an auction and the proceeds from the sale of the motorcycle, and any other recoveries, are applied to the outstanding obligations under the contract, which may include fees and expenses relating to the repossession and disposition of the motorcycle. Liquidation proceeds from the sale of the repossessed motorcycle and other recoveries are usually not sufficient to cover the outstanding balance of the contract.

After standard collection efforts are exhausted and all collections, including net sale proceeds, refunds on cancelled service contracts and protection products and insurance claims, are applied, the servicer charges off any remaining balance owed by the obligor. The servicer continues to pursue collection of deficiency balances after charge off through internal efforts and third-party vendors, when it deems such action to be appropriate. See “Legal Aspects of the Contracts” in this prospectus.

The servicer may, in its discretion and on a case-by-case basis subject to the terms of the sale and servicing agreement, extend or modify the terms of contracts in situations where the servicer believes such action is likely to maximize the amount collected. A payment extension defers one or more past due payments and moves the scheduled maturity date later by the number of months extended. The length of the payment extension is typically one month, although extensions may be granted for multiple months, and multiple payment extensions may be granted over the term of a contract. After a payment extension, an account generally is no longer considered delinquent through the next scheduled payment date. Extensions and payment deferrals are limited by the sale and servicing agreement and the servicer’s customary servicing practices and are not granted to defer losses which the servicer deems are inevitable. See generally “Description of the Transfer and Servicing Agreements—Servicing” in this prospectus for a description of restrictions on contract modifications contained in the sale and servicing agreement. The servicer may permit an obligor to change the monthly payment due date, provided that (i) at least one payment has been posted on account, (ii) such account is less than 30 days delinquent, and (iii) such change would not result in fewer than twelve monthly payments being made in a calendar year. A due date change is not considered to be a payment extension, but a payment extension may be required to process a due date change. In response to COVID-19, the servicer temporarily offered payment relief options to customers impacted by COVID-19 in the form of payment extensions for an initial period of up to two months. In addition to the initial two-month extension, obligors could request (i) an additional one-month extension for a maximum three months of extensions and (ii) if the obligor simultaneously made a payment on the contract, another one-month extension for a maximum of four months of extensions. The servicer does not currently offer the payment relief options implemented in response to COVID-19, though it is possible that the servicer could implement such programs in the future to address similar economic impacts from a pandemic or similar global event.

The servicer is responsible for all servicing functions for the contracts. As is customary in the servicing industry, the servicer engages vendors to perform certain of its servicing processes. The vendors providing those functions do not have discretion relating to activities that the servicer believes would materially affect the amounts realized or collected with respect to the contracts or the timing of receipt of such amounts, and the servicer retains ultimate responsibility for those functions under the sale and servicing agreement. The servicer monitors the activities and effectiveness of vendors and performs periodic reviews, including through on-site visits, of vendors’ financial condition, data security, and other factors within vendor risk management policies and guidelines. The servicer believes these vendors could be readily replaced, if necessary.

 

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The servicer also furnishes monthly and annual statements to the indenture trustee with respect to distributions on securitization transactions. See generally “Description of the Transfer and Servicing Agreements” in this prospectus for a description of the sale and servicing agreement and the servicer’s duties under the sale and servicing agreement.

The Trustees

Owner Trustee

Wilmington Trust, National Association will be the owner trustee under the trust agreement. Wilmington Trust, National Association is a national banking association with trust powers, incorporated in Delaware. Wilmington Trust, National Association has served as owner trustee in several asset-backed securities transactions involving motorcycle receivables. Wilmington Trust, National Association is subject to various legal proceedings that arise from time to time in the ordinary course of business. Wilmington Trust, National Association does not believe that the ultimate resolution of any of these proceedings will have a materially adverse effect on its services as owner trustee.

The owner trustee’s main obligations will be to create the issuing entity by filing a certificate of trust with the Delaware Secretary of State, execute documents on behalf of the issuing entity, and cooperate with the administrator in carrying out the administrator’s obligation to qualify and preserve the issuing entity’s qualification to do business in each jurisdiction, if any, required to protect the validity and enforceability of the indenture, the notes, the contracts and any other instrument and agreement included in the trust estate. The owner trustee will not be required to perform any of the obligations of the issuing entity under the trust agreement or any transaction document to the extent such obligations are required to be performed by the administrator under the administration agreement, and the owner trustee will have no liability or obligation to perform the obligations of the issuing entity under the transaction documents other than as set forth in the trust agreement.

The administrator will separately pay the fees of the owner trustee in connection with its duties under the trust agreement. The owner trustee will also be entitled to indemnification by the depositor for, and will be held harmless against, any loss, liability, fee, disbursement or expense incurred by it not resulting from its own willful misconduct, bad faith or negligence. The depositor will also indemnify the owner trustee for specified taxes that may be assessed in connection with the transaction.

The owner trustee’s liability in connection with the issuance and sale of the notes is limited solely to the express obligations set forth in the trust agreement, and the owner trustee will not be responsible for the action or inaction of the servicer or the administrator. The owner trustee of the issuing entity may resign at any time, in which event the administrator, on the issuing entity’s behalf, will be obligated to appoint a successor. If the owner trustee becomes insolvent or otherwise ceases to be eligible to continue in that capacity under the trust agreement, it may be removed by the administrator. In those circumstances, the issuing entity or the administrator, on the issuing entity’s behalf, will be obligated to appoint a successor. Any resignation or removal of the owner trustee will not become effective until acceptance of the appointment of a successor owner trustee. Any fees and expenses relating to the removal or replacement of the owner trustee will be paid by the administrator and will not be paid from collections or other amounts received in respect of the contracts.

The owner trustee and any of its affiliates may hold notes in its own name or as a pledgee. For the purpose of meeting the legal requirements of some jurisdictions, the issuing entity and the owner trustee will have the power to appoint co-trustees or separate trustees of all or any part of the issuing entity.

Indenture Trustee

The indenture trustee will be Citibank, N.A. (“Citibank”), a national banking association and wholly owned subsidiary of Citigroup Inc., a Delaware corporation. Citibank performs as indenture trustee through the Agency and Trust line of business, a part of Issuer Services. Citibank has primary corporate trust offices located in both New York and London. Citibank is a leading provider of corporate trust services offering a full range of agency, fiduciary, tender and exchange, depositary and escrow services. As of the end of the fourth quarter of 2022, Citibank’s Agency and Trust group managed in excess of $8 trillion in fixed

 

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income and equity investments on behalf of over 3,000 corporations worldwide. Since 1987, Citibank Agency and Trust has provided corporate trust services for asset-backed securities containing pool assets consisting of airplane leases, auto loans and leases, boat loans, commercial loans, commodities, credit cards, durable goods, equipment leases, foreign securities, funding agreement backed note programs, truck loans, utilities, student loans and commercial and residential mortgages. As of the end of the fourth quarter of 2022, Citibank acted as indenture trustee and/or paying agent for approximately 250 various asset backed trusts supported by either auto loans or leases or equipment loans or leases.

The indenture trustee’s main obligations will be to hold the security interest in the contracts and the other assets of the issuing entity on behalf of the noteholders, and, subject to the terms of the transaction documents, administer the accounts of the issuing entity, act as note registrar in maintaining records of the noteholders, and provide for registration and transfer of the notes (including through utilization of a clearing agency), notify noteholders (including through utilization of a clearing agency) of the occurrence of a delinquency trigger, voting rights relating to such delinquency trigger event and the results of the applicable asset representations review, notify the asset representations reviewer when a review has been directed by the noteholders, notify noteholders of the occurrence of an event of default and enforce remedies on behalf of the noteholders following an event of default.

The indenture trustee is required, upon knowledge of the occurrence of an event of default, to mail to each noteholder notice of such event of default within 90 days of its occurrence. Additionally, the indenture trustee must deliver an annual report to the noteholders if certain events occur, as identified in the Trust Indenture Act of 1939 (the “Trust Indenture Act”), including a change in the indenture trustee’s eligibility under the Trust Indenture Act, any conflict of interest under the Trust Indenture Act, any release of the issuing entity’s assets from the lien created under the indenture, and any action taken by the indenture trustee that has a material adverse effect on the notes. Whenever a notice or other communication is required to be given to the noteholders pursuant to the indenture, and unless definitive notes have been issued to the noteholders, the indenture trustee will give all such notices and communications to the clearing agency, and will have no obligation to the noteholders.

Upon the occurrence of an event of default, in exercising its rights and powers under the indenture the indenture trustee will use the same degree of care and skill that a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs, and the indenture trustee will be permitted to take such actions as it deems most effective to protect and enforce its rights and the rights of the noteholders under the indenture.

The indenture trustee fees will be paid by the administrator on behalf of the issuing entity and, to the extent not paid by the administrator, from available amounts prior to any payments to the noteholders.

The depositor and the issuing entity will indemnify the indenture trustee for, and will hold the indenture trustee harmless against, any loss, liability, fee, disbursement or expense incurred by it not resulting from its own willful misconduct, bad faith or negligence. The issuing entity or the administrator will also indemnify the indenture trustee for specified taxes that may be assessed in connection with the transaction.

The indenture trustee’s liability in connection with the issuance and sale of the notes is limited solely to the express obligations set forth in the sale and servicing agreement or indenture, and the indenture trustee will not be responsible for the action or inaction of the servicer or the administrator. The indenture trustee may resign at any time, in which event the issuing entity or the administrator, on the issuing entity’s behalf, will be obligated to appoint a successor. If the indenture trustee becomes insolvent or otherwise ceases to be eligible to continue in its capacity under the indenture, it may be removed by the issuing entity or the administrator, on the issuing entity’s behalf. In those circumstances, the issuing entity or the administrator, on the issuing entity’s behalf, will be obligated to appoint a successor. Any resignation or removal of the indenture trustee will not become effective until acceptance of the appointment of a successor indenture trustee. Any fees and expenses relating to the removal or replacement of an indenture trustee will be paid by the administrator and will not be paid from collections or other amounts received in respect of the contracts.

In addition, the holders of more than 50% of the aggregate outstanding principal amount of the notes may remove the indenture trustee without cause and may appoint a successor indenture trustee.

The indenture trustee or any of its affiliates may hold notes in its own name or as a pledgee.

 

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Citibank will also act as the calculation agent. For each interest period, the calculation agent will obtain 30-day average SOFR for the floating rate notes as described under “Description of the Notes and the Indenture—Calculation of Floating Rate Interest” and will provide the same to the administrator to calculate the interest rate for the floating rate notes as described under “Description of the Notes and the Indenture—Calculation of Floating Rate Interest”. If the administrator has determined prior to the relevant reference time that a benchmark transition event and its related benchmark replacement date have occurred, the administrator will determine an alternative benchmark in accordance with the benchmark replacement provisions described under “Description of the Notes and the Indenture—Calculation of Floating Rate Interest—Effect of Benchmark Transition Event” and after such date the administrator will calculate the interest rate for the floating rate notes based on that alternative benchmark.

One of the underwriters is an affiliate of the indenture trustee and the calculation agent.

Asset Representations Reviewer

Clayton Fixed Income Services LLC, a Delaware limited liability company (“Clayton”), will be the asset representations reviewer under the asset representations review agreement. Clayton is a wholly-owned subsidiary of Covius Services, LLC, and with its affiliates, has provided independent due diligence loan review and servicer oversight services since 1989. Clayton has been engaged as the asset representations reviewer on more than 550 auto and equipment loan, lease and dealer floorplan and credit card securitization transactions since 2015, including securitization transactions of the sponsor involving motorcycle receivables.

Clayton and its affiliates are leading providers of targeted due diligence reviews of securitized assets and policies and procedures of originators and servicers to assess compliance with representations and warranties, regulatory and legal requirements, investor guidelines and settlement agreements. Clayton and its affiliates have performed over 17 million loan reviews and provided ongoing oversight on over $2 trillion of securitization transactions on behalf of investors, sponsors, issuers and originators, including government sponsored enterprises and other governmental agencies. These services have been performed primarily on residential mortgage loan and residential mortgage-backed security transactions, although Clayton and its affiliates have also performed these services for transactions involving auto loans, equipment leases, credit cards, commercial mortgage loans, student loans, timeshare loans and boat and recreational vehicle loans.

The asset representations reviewer is, and for so long as the notes remain outstanding will be, an “eligible asset representations reviewer”, meaning that:

•

it is not affiliated with the sponsor, the depositor, the servicer, the indenture trustee, the owner trustee or any of their affiliates, and

​

•

neither it nor any of its affiliates has been hired by the sponsor or the underwriters to perform pre-closing due diligence work on the contracts.

​

The asset representations reviewer’s main obligations will be to review each review contract following receipt of a review notice from the indenture trustee, and to provide a report on the results of the review to the issuing entity, the servicer and the indenture trustee. A “review contract” includes each contract that is 60 days or more delinquent (assuming 30-day months) at the end of the prior month, as determined in accordance with the servicer’s customary servicing practices. See “Representations, Repurchase and Asset Representations Review—Asset Representations Review”.

The asset representations reviewer is not responsible for reviewing the contracts for compliance with the representations under the transaction documents (except in connection with review under the asset representations review agreement), determining whether noncompliance with any representation is a breach of the transaction documents, or determining if any contract is required to be repurchased.

The servicer or the administrator, as applicable, on behalf of the issuing entity, will pay annual fees and review fees of the asset representations reviewer and reimburse the asset representations reviewer for reasonable travel expenses relating to a review (if any) and pay any indemnities due to the asset representations reviewer. The issuing entity will pay any unpaid amounts to the asset representations reviewer on each

 

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payment date (up to a maximum amount of $200,000 per year), in accordance with the priority of payments set forth under “Payments to the Noteholders—Distributions” in this prospectus. The issuing entity will pay any of these amounts to the asset representations reviewer in excess of $200,000 per year only after paying in full on each payment date all other fees and expenses of the issuing entity and all required payments of principal of and interest on the notes and after making any required deposits in the reserve fund.

The asset representations reviewer will not be liable for any action, omission or error in judgment unless resulting from willful misconduct, bad faith or negligence by the asset representations reviewer. The asset representations reviewer will not be liable for any errors in any review materials relied on by it to perform a review or for the noncompliance or breach of any representation made about the contracts.

The issuing entity and the administrator will indemnify the asset representations reviewer for liabilities and damages resulting from the asset representations reviewer’s performance of its obligations under the asset representations review agreement unless resulting from the willful misconduct, bad faith or negligence (other than errors in judgment) of the asset representations reviewer or the breach of representations made by the asset representations reviewer in the asset representations review agreement.

The asset representations reviewer may not resign, unless the asset representations reviewer determines it is legally unable to perform its obligations under the asset representations review agreement and there is no reasonable action that it could take to make the performance of its obligations under the asset representations review agreement permitted under applicable law. The issuing entity may remove the asset representations reviewer if the asset representations reviewer ceases to meet the eligibility requirements under the asset representations review agreement, breaches any of its representations, warranties, covenants or obligations, or becomes subject to a bankruptcy or similar proceeding. No resignation or removal of the asset representations reviewer will be effective until a successor asset representations reviewer is in place. Any successor asset representations reviewer must meet the eligibility requirements under the asset representations review agreement. Reasonable expenses relating to the transitioning of the asset representations reviewer obligations to the successor asset representations reviewer will be paid by the asset representations reviewer.

If the asset representations reviewer resigns or is otherwise removed or substituted, such resignation, removal or substitution will be reported on the Form 10-D for that month.

Affiliations and Certain Relationships and Transactions

The owner trustee is not an affiliate of any of the depositor, the sponsor, the servicer, the issuing entity, the indenture trustee or the asset representations reviewer. However, the owner trustee and its affiliates act as owner trustee for other trusts established by the depositor, and the owner trustee or one or more of its affiliates may, from time to time, engage in arm’s-length transactions with the depositor, the servicer, the sponsor, the indenture trustee or affiliates of any of them, that are distinct from its role as owner trustee, including transactions both related and unrelated to the securitization of motorcycle contracts.

Neither the indenture trustee nor the calculation agent is an affiliate of any of the depositor, the sponsor, the servicer, the issuing entity, the owner trustee or the asset representations reviewer. However, the indenture trustee acts as indenture trustee for securities issued by other trusts established by the depositor, and the indenture trustee or one or more of its affiliates may, from time to time, engage in arm’s-length transactions with the depositor, the servicer, the sponsor, the owner trustee or affiliates of any of them, that are distinct from its role as indenture trustee, including transactions both related and unrelated to the securitization of motorcycle contracts. One of the underwriters is an affiliate of the indenture trustee and the calculation agent.

The asset representations reviewer is not an affiliate of any of the depositor, the sponsor, the servicer, the issuing entity, the owner trustee or the indenture trustee. However, the asset representations reviewer acts as asset representations reviewer for certain securitization transactions involving other trusts established by the depositor.

The sponsor (which is also the seller, the servicer and the administrator) and the depositor are affiliates and engage in transactions with each other involving the securitization of motorcycle receivables, including those described in this prospectus.

 

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The issuing entity will be a direct subsidiary or an affiliate of the depositor and an indirect subsidiary or an affiliate of the sponsor. The depositor will retain the certificate at closing and will retain the right to sell all or a portion of the certificate at any time, subject to Regulation RR. Following such a sale to an unaffiliated third party, the issuing entity may cease to be an affiliate of either the sponsor or the depositor. The issuing entity has not engaged, and will not engage, in any material transactions with the sponsor or the depositor that are outside of the ordinary course of business or that are other than at arm’s-length. The certificate retained by the depositor for purposes of the sponsor’s compliance with Regulation RR will not be hedged by the sponsor, the depositor or any of their affiliates other than as permitted by Regulation RR.

In the ordinary course of business from time to time, HDCC and its affiliates have business relationships and agreements with affiliates of the owner trustee and the indenture trustee, including commercial banking and corporate trust services, committed credit facilities, underwriting agreements, hedging agreements and investment and financial advisory services, all on arm’s-length terms and conditions.

The Contracts

The issuing entity will own a pool of fixed rate, simple interest promissory notes and security agreements secured by new and used motorcycles.

Harley-Davidson® Motorcycles

The motorcycles securing the contracts generally are new or used motorcycles manufactured by Harley-Davidson.

Harley-Davidson designs, manufactures and sells at wholesale a range of distinctive and customizable motorcycles as well as motorcycle parts, accessories, riding gear, apparel and related services. Harley-Davidson branded motorcycle products feature classic styling, innovative design, distinctive sound, and superior quality with the ability to customize. Harley-Davidson manufactures both internal combustion and electric powered motorcycles. Harley-Davidson’s internal combustion engines generally have displacements that are greater than 600 cc, up to a maximum displacement of approximately 1900 cc. In 2019, Harley-Davidson introduced LiveWire®, its first electric motorcycle, featuring a Rechargeable Energy Storage System (RESS) composed of lithium-ion cell batteries.

The total on-road motorcycle market is comprised of the following segments:

•

Touring (emphasizes rider comfort and load capacity and incorporates features such as fairings and luggage compartments);

​

•

Dual (designed with the capability for use on public roads as well as for some off-road recreational use);

​

•

Cruiser (emphasizes styling, customization and casual riding);

​

•

Standard (a basic motorcycle which usually features upright seating for one or two passengers);

​

•

Sportbike (incorporates racing technology and performance and aerodynamic styling and riding position); and

​

•

Electric (powered by electric motors).

​

Competition in the segments of the motorcycle market in which Harley-Davidson currently competes is based upon a number of factors including product capabilities and features, styling, price, quality, reliability, warranty, availability of financing, and quality of dealer network. Harley-Davidson believes its motorcycles continue to generally command a premium price at retail relative to competitors’ motorcycles. Harley-Davidson motorcycles feature unique styling, customization, innovative design, distinctive sound, superior quality and reliability, and include a warranty. Harley-Davidson considers the availability of a line of motorcycle parts and accessories and general merchandise, the availability of financing through HDFS and its global network of independent and corporate-owned dealers to be competitive advantages.

On September 27, 2022, Harley-Davidson, Inc. spun off its LiveWire® unit in a $1.8 billion merger resulting in the LiveWire® unit becoming a publicly traded company, with Harley-Davidson, Inc. maintaining

 

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a majority ownership interest. It is not expected that the transaction will have any material impact on near-term operations of Harley-Davidson. Harley-Davidson plans to continue to finance and service wholesale inventory receivables and retail consumer loans for the purchase of LiveWire® motorcycles and motorcycle parts and accessories.

Criteria for Selecting the Contracts

The contracts have been selected by the seller from the seller’s portfolio of contracts using several criteria, some of which are set forth below and in this prospectus under “The Sponsor, Seller, Servicer and Administrator”. The contracts were originated by Eaglemark Savings Bank, assigned to the seller, and subsequently acquired by the depositor from the seller in the ordinary course of the depositor’s business. The selection criteria include the requirements that each contract:

•

is a fixed rate, simple interest promissory note and security agreement relating to the retail purchase of a motorcycle;

​

•

was originated in the United States (including U.S. military bases) and is payable in U.S. dollars;

​

•

is secured by a new or used motorcycle manufactured by Harley-Davidson;

​

•

has an obligor with a FICO® score greater than or equal to 670;

​

•

has a contract interest rate less than or equal to 11.000%;

​

•

has a contract interest rate of not less than 0.010%;

​

•

will be less than 30 days delinquent as of the cutoff date;

​

•

will amortize the amount financed over an original term (which is the actual number of payment cycles over the life of the contract) no greater than 84 months (not including any deferral period preceding the initial payment, which generally will not exceed four months); and

​

•

will have a principal balance of at least $500.00 as of the cutoff date.

​

No selection procedures believed to be adverse to the noteholders have been or will be utilized in selecting the contracts from qualifying promissory notes and security agreements. No expenses incurred in connection with the selection and acquisition of the contracts are payable from the proceeds of the issuance of the notes.

Characteristics of the Contracts

The characteristics set forth in this section are based on the pool of contracts as of January 31, 2023 (the “cutoff date”) or the date of origination, as applicable. “Initial pool balance” means the pool balance as of the cutoff date. The aggregate outstanding principal balance of the pool of contracts as of the cutoff date is $628,507,157.14 and the pool of contracts has the following characteristics:

•

the latest scheduled payment of any contract as of the cutoff date is due no later than November 25, 2029;

​

•

as of the cutoff date, 100% of the initial pool balance was attributable to contracts that had at least one payment made by the cutoff date;

​

•

as of the cutoff date, approximately 61.32% of the initial pool balance was attributable to loans to purchase motorcycles that were new, and approximately 38.68% of the initial pool balance was attributable to loans to purchase motorcycles that were used at the time the related contract was originated;

​

•

the contracts in the pool of contracts have a contract interest rate of at least 0.010% per annum and not more than 11.000% per annum, and the weighted average contract interest rate of the pool of contracts as of the cutoff date was approximately 7.515%, per annum (see Table 1 below);

​

•

the contracts in the pool of contracts had remaining terms to maturity, as of the cutoff date, of at least 3 months but not more than 83 months and original terms to maturity (not including any initial deferral period) of at least 24 months but not more than 84 months (See Tables 2 and 3 below);

​

 

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•

the contracts in the pool of contracts had a weighted average remaining term to maturity as of the cutoff date of approximately 62 months, and a weighted average original term to maturity of approximately 71 months;

​

•

as of the cutoff date, the average outstanding principal balance per contract in the pool of contracts was approximately $19,421.75, and the outstanding principal balances on the contracts in the pool of contracts ranged from $536.41 to $76,126.15 (see Table 4 below);

​

•

the contracts in the pool of contracts arose from loans to obligors located in the United States (including U.S. military bases). As of the cutoff date, obligors located in the following states accounted for the following approximate amounts expressed as a percentage of the initial pool balance: 10.32% in California, 9.30% in Texas, and 6.80% in Florida (see Table 5 below). No other state or geographic area (including the District of Columbia and U.S. military bases) represented more than 5.00% of the initial pool balance;

​

•

as of the cutoff date, the weighted average FICO® score as of the date of origination of obligors for which a FICO® score was obtained in respect of the pool of contracts was approximately 758, and the FICO® scores as of the date of origination of obligors in respect of the pool of contracts ranged from 670 to 850 (see Table 6 below); and

​

•

as of the cutoff date, approximately 97.50% of the initial pool balance was attributable to loans evidenced by contracts originated as electronic contracts.

​

The following tables describe the following characteristics of the pool of contracts as of the cutoff date: the distribution by contract interest rate, the distribution by remaining term to maturity, the distribution by original term to maturity, the distribution by outstanding principal balance, the geographic distribution and the distribution by FICO® score as of the date of contract origination. At the time of and following the transfer of the contracts to the issuing entity, the aggregate characteristics of the pool of contracts will vary from those of the pool of contracts as of the cutoff date.

 

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TABLE 1

DISTRIBUTION BY CONTRACT INTEREST RATE OF THE POOL OF CONTRACTS
(AS OF THE CUTOFF DATE)

(1)

Percentages may not add to 100.00% because of rounding.

​

TABLE 2

DISTRIBUTION BY REMAINING TERM (MONTHS) TO MATURITY(1)
OF THE POOL OF CONTRACTS
(AS OF THE CUTOFF DATE)

(1)

For a description of how information presented in this table may differ from the asset-level data filed with the SEC on Form ABS-EE, see “Asset-Level Information”.

​

(2)

Percentages may not add to 100.00% because of rounding.

​

 

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TABLE 3

DISTRIBUTION BY ORIGINAL TERM (MONTHS) TO MATURITY(1)(2)
OF THE POOL OF CONTRACTS
(AS OF THE CUTOFF DATE)