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Rating Action:

Moody's takes rating actions on Harley-Davidson Motorcycle ABS transactions

11 Aug 2010

Approximately $330 million of asset-backed securities affected

New York, August 11, 2010 -- Moody's has upgraded nine subordinate tranches from five vehicle-backed securitizations sponsored by Harley-Davidson Credit Corp (Harley) between 2006 and 2008. Consistent with trends noted from other issuers in the vehicle ABS sector, stabilization in the U.S. economy has benefitted Harley's outstanding transactions as well. An additional two months of performance data since the securities were placed on review for upgrade, have shown continued stabilization in both net losses and delinquencies. While lifetime expected cumulative pool losses (CNL) for each affected transaction is higher than the original CNL expectation, the credit enhancement now supporting each security under this action has increased since deal closing. This build-up in credit enhancement is due to the sequential pay structures as well as a higher reserve account target for all transactions due to breach of performance triggers; specifically, cumulative net loss trigger.

Moody's expects the Harley-Davidson Motorcycle Trust 2006-3 to incur CNL of 5.75%. The initial expectation for this transaction at closing was 3.25%. While the revised CNL is higher than original expectation, total hard credit enhancement for Class B (excluding excess spread of approximately 6.4% per annum) as a percentage of the remaining collateral balance is approximately 6%. This is an increase from 2% at closing. Updated remaining expected loss for the transaction is approximately 3.8% of the outstanding collateral balance. Moody's volatility proxy Aaa level for the transaction is approximately 13.4% of the outstanding collateral balance.

Harley-Davidson Motorcycle Trust 2007-1 is expected to incur CNL of approximately 5.75%. The initial expectation for this transaction at closing was 3%. Total hard credit enhancement for Cl. B and Cl. C (excluding excess spread of approximately 6.40% per annum) as a percentage of the remaining collateral balance is approximately 17% and 6% respectively. This is an increase from 10.0% and 1.5% respectively at closing. Updated remaining expected loss for the transaction is approximately 3.4% of the outstanding collateral balance. Moody's volatility proxy Aaa level for the transaction is approximately 11.8% of the outstanding collateral balance.

Moody's expects the Harley-Davidson Motorcycle Trust 2007-2 to incur CNL of 7.25%. The initial expectation for this transaction at closing was 3.50%. Total hard credit enhancement for Cl. B and Cl. C (excluding excess spread of approximately 6.7% per annum) as a percentage of the remaining collateral balance is approximately 15.8% and 6% respectively. This is an increase from 10.8% and 1.5% respectively at closing. Updated remaining expected loss for the transaction is approximately 5.2% of the outstanding collateral balance. Moody's volatility proxy Aaa level for the transaction is approximately 18.4% of the outstanding collateral balance.

Moody's expects the Harley-Davidson Motorcycle Trust 2007-3 to incur CNL of approximately 6.75%. The initial expectation for this transaction at closing was 3.50%. Total hard credit enhancement for Cl. B and Cl. C (excluding excess spread of approximately 4.3% per annum) as a percentage of the remaining collateral balance is approximately 16.1% and 7.5% respectively. This is an increase from 10.8% and 1.5% respectively at closing. Updated remaining expected loss for the transaction is approximately 5.4% of the outstanding collateral balance. Moody's volatility proxy Aaa level for the transaction is approximately 18.9% of the outstanding collateral balance.

Moody's expects the Harley-Davidson Motorcycle Trust 2008-1 to incur CNL of 6.50%. The initial expectation for this transaction at closing was 3.50%. Total hard credit enhancement for Cl. B and Cl. C (excluding excess spread of approximately 6.2% per annum) as a percentage of the remaining collateral balance is approximately 14.3 % and 6% respectively. This is an increase from 12.3% and 2.3% respectively at closing. Updated remaining expected loss for the transaction is approximately 6% of the outstanding collateral balance. Moody's volatility proxy Aaa level for the transaction is approximately 20.8% of the outstanding collateral balance.

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the current macroeconomic environment and conditions in the used vehicle market. Compared to the U.S. Vehicle ABS sector, performance of motorcycle backed ABS can be more volatile due to the non-essential nature of the asset which may be viewed by most borrowers as less of a necessity than cars. Seasonality can also impact performance (defaults and recoveries). Typically, performance improves during the summer riding season and deteriorates during the winter season. Overall, Moody's central global scenario remains "Hook-shaped" for 2010 and 2011; we expect overall a sluggish recovery in most of the world largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels.

The principal methodology used in these rating actions was "Moody's Approach to Rating U.S. Auto Loan-Backed Securities", published in June 2007 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating these transactions can also be found in the Rating Methodologies sub-directory on Moody's website. Further information on Moody's analysis of this transaction is available on www.moodys.com. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

Complete action as follows:

Issuer: Harley-Davidson Motorcycle Trust 2006-3

Pool Current Expected Cumulative Net Losses: 5.75% (as a percentage of the original loan pool balance)

Cl. B, Upgraded to Aa3 (sf); previously on Jun 8, 2010 A3 (sf) Placed Under Review for Possible Upgrade

Issuer: Harley-Davidson Motorcycle Trust 2007-1

Pool Current Expected Cumulative Net Losses: 5.75% (as a percentage of the original loan pool balance)

Cl. B, Upgraded to Aaa (sf); previously on Jun 8, 2010 A1 (sf) Placed Under Review for Possible Upgrade

Cl. C, Upgraded to A1 (sf); previously on Jun 8, 2010 Ba1 (sf) Placed Under Review for Possible Upgrade

Issuer: Harley-Davidson Motorcycle Trust 2007-2

Pool Current Expected Cumulative Net Losses: 7.25% (as a percentage of the original loan pool balance)

Cl. B, Upgraded to Aaa (sf); previously on Jun 8, 2010 A3 (sf) Placed Under Review for Possible Upgrade

Cl. C, Upgraded to Baa2 (sf); previously on Jun 8, 2010 Ba2 (sf) Placed Under Review for Possible Upgrade

Issuer: Harley-Davidson Motorcycle Trust 2007-3

Pool Current Expected Cumulative Net Losses: 6.75% (as a percentage of the original loan pool balance)

Cl. B, Upgraded to Aa1 (sf); previously on Jun 8, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

Cl. C, Upgraded to Baa3 (sf); previously on Jun 8, 2010 B1 (sf) Placed Under Review for Possible Upgrade

Issuer: Harley-Davidson Motorcycle Trust 2008-1

Pool Current Expected Cumulative Net Losses: 6.50% (as a percentage of the original loan pool balance)

Cl. B, Upgraded to Aa1 (sf); previously on Jun 8, 2010 Baa2 (sf) Placed Under Review for Possible Upgrade

Cl. C, Upgraded to Baa3 (sf); previously on Jun 8, 2010 Ba3 (sf) Placed Under Review for Possible Upgrade

San Francisco
Eric Fellows
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Alda F. Sanchez
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's takes rating actions on Harley-Davidson Motorcycle ABS transactions
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