Philo: Another so-called crossover credit was issued by Harley Davidson (HOG), specifically its bonds that mature in June 2018 with a coupon of 6.8%. The bonds are now trading at 79 on the dollar. The yield is 10.4%, roughly 735 basis points over Treasuries.

Barron's: So it sounds like Harley has enough cash on hand?

Philo: Yes, they do. We own bonds issued by the company's finance subsidiary, which is called Harley Davidson Financial Services. Unencumbered financial-subsidiary assets, primarily accounts receivable, are 120% of its unsecured debt, which is very high for a finance company. Even if loan originations slow down a lot, a well-run finance company throws off a ton of free cash, and the credit performance has held up quite well. Our analysis is that it will continue to do so.