Hovnanian begins private exchange offer for seven series of notes

By Angela McDaniels

Tacoma, Wash., Oct. 27 - Hovnanian Enterprises, Inc. began an offer Monday to exchange seven series of K. Hovnanian Enterprises, Inc.'s senior notes in a private placement for up to $250 million of new 18% senior secured notes due 2017.

The notes eligible for exchange are K. Hovnanian's $100 million 8% senior notes due 2012, $215 million 6½% senior notes due 2014, $150 million 6 3/8% notes due 2014, $200 million 6¼% senior notes due 2015, $300 million 7½% senior notes due 2016, $300 million 6¼% notes due 2016 and $250 million 8 5/8% senior notes due 2017.

For each $1,000 principal amount of notes tendered, the principal amount of new notes to be issued will be $470 for the 8% notes, $400 for the 6½% notes, $400 for the 6 3/8% notes, $405 for the 6¼% notes due 2015, $410 for the 7½% notes, $415 for the 6¼% notes due 2016 and $420 for the 8 5/8% notes.

In each case, the payout includes an early premium equal to $5 principal amount of 18% notes for notes tendered by the early tender date, 5 p.m. ET on Nov. 7. Notes tendered after that time but before the final deadline - midnight ET on Nov. 24 - will not receive the $5 premium.

The company will also pay accrued interest up to but excluding the settlement date.

K. Hovnanian will not accept any tender that would result in the issuance of less than $2,000 principal amount of 18% notes, according to a company news release.

The new notes will be issued by K. Hovnanian and guaranteed by Hovnanian Enterprises and substantially all of its subsidiaries. They will be secured on a third-priority lien basis by substantially all the assets owned by the company and guarantors to the extent that these assets secure obligations under the company's revolving credit facility, second-priority secured notes and some other permitted debt.

The company has assigned an acceptance priority level of 1 to the 8% notes, 6½% notes and 6 3/8% notes. The 6¼% notes due 2015, 7½% notes, 6¼% notes due 2016 and 8 5/8% notes have acceptance priority levels of 2, 3, 4 and 5, respectively.

All notes tendered with a higher acceptance priority level will be accepted before any notes in the next-highest priority level will be accepted, and notes tendered in excess of the $250 million cap will be subject to proration.

The exchange offer is being made within the United States only to qualified institutional buyers under Rule 144A of the Securities Act of 1933 and outside the United States to non-U.S. investors.

Hovnanian is a homebuilder based in Red Bank, N.J.

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