Fitch rates Hovnanian loan B, notes CCC-, CCC+

Fitch Ratings said it assigned Hovnanian Enterprises, Inc.'s proposed $75 million first-lien term loan due Aug. 1, 2019, B/RR1, $75 million 10% senior secured second-lien notes due Oct. 15, 2018, CCC-/RR5, and $75 million 9½% senior secured notes due Nov. 15, 2020, CCC+/RR3.

Net proceeds from the term loan and the senior secured second-lien notes issuances will be used to repay existing debt, including Hovnanian’s announcement of a tender offer to purchase for cash all of the company's $121 million 8 5/8% senior notes due 2017. Any excess proceeds from the consummation of the tender offer will be used to repurchase or repay debt securities with maturities in 2017, or as agreed upon, Hovnanian’s other debt.

The new $75 million term loan will be secured on a super priority basis by the assets currently constituting collateral under Hovnanian’s existing $577 million 7¼% senior secured first-lien notes due 2020, the new $75 million senior secured second-lien notes due 2018, and the existing 9 1/8% senior secured second-lien notes due 2020 ($220 million outstanding before the exchange). The new term loan matures on Aug. 1, 2019 (or Oct. 15, 2018 if the company’s existing 7% senior notes due 2021 remain outstanding at that time or if any refinancing with respect to the 7% notes has a maturity date prior to January 2021).

The new $75 million 10% senior secured second-lien notes will be secured on a pari passu second-lien basis with Hovnanian’s existing second-lien notes by substantially all of the assets of the company.

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