Hovnanian halts debt cuts, grows liquidity amid economic uncertainty

By Devika Patel

Knoxville, Tenn., Dec. 9 – Hovnanian Enterprises, Inc. has been improving its balance sheet for the past three years and the results are dramatic, but management does not believe the company can sustain these significant debt reductions in the current economic environment and has thus shifted priorities, focusing on improving liquidity and retaining cash in the short-term, with debt reductions on the back burner.

Total debt to adjusted EBITDA has declined to 2.7x as of the end of fiscal 2022, compared to 9.7x in fiscal 2019.

Net debt to adjusted EBITDA has declined to 2x as of the end of fiscal 2022, compared to 8.9x in fiscal 2019.

Net debt decreased $588 million to $965 million at the end of fiscal 2022 from $1.55 billion at the end of fiscal 2019.

“We were happy with the progress we’ve made in improving these credits and balance sheet metrics over the past several years,” executive vice president and chief financial officer J. Larry Sorsby said on the company’s fourth quarter and year ended Oct. 31 earnings conference call on Thursday.

“Given the current housing environment and near term, it will be difficult to achieve similar improvements.

“However, we remain committed to our long-term balance sheet improvement goals.

“Over the long term, we expect to continue improving our balance sheet by reducing debt and growing equity,” he said.

Total liquidity as of Oct. 31, 2022 was $457.3 million, significantly above management’s targeted liquidity range of $170 million to $245 million.

“Due to current market conditions, we have temporarily shifted our focus to preserving liquidity and paused our near-term debt reduction plans,” Sorsby said.

“We remain committed to strengthening our balance sheet and intend to revisit our debt retirement initiatives once market conditions improve,” he said.

Aside from a revolver due in June 2024, the company has no debt maturing until fiscal 2026.

“We retired early $281 million of senior notes over the past two years,” Sorsby said.

“Early in the fourth quarter, we amended our revolving credit facility to extend the maturity date to June 30, 2024.

“After that, we don’t have any debt maturing until the first quarter of fiscal 2026,” he said.

Total revenues increased 8.9% to $886.8 million in the fourth quarter of fiscal 2022, compared to $814.3 million in the same quarter of 2021.

For the year ended Oct. 31, 2022, total revenues were $2.92 billion, compared to $2.78 billion in the prior year.

Cash and cash equivalents were $326,198,000 as of Oct. 31, 2022, compared to $245.97 million as of Oct. 31, 2021.

Senior notes and credit facilities (net of discounts, premiums and debt issuance costs) were $1,146,547,000 as of Oct. 31, 2022, compared to $1,248,373,000 as of Oct. 31, 2021.

Hovnanian is a Matawan, N.J., homebuilder.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.