Hovnanian adopts rights plan

By Lisa Kerner

Charlotte, N.C., Aug. 4 - Hovnanian Enterprises, Inc.'s board of directors adopted a shareholder rights plan designed to preserve the value of certain tax assets primarily associated with net operating loss carryforwards and built-in losses under section 382 of the Internal Revenue Code.

The plan reduces the likelihood of an ownership change, which would affect Hovnanian's ability to use its net operating loss carryforwards.

An ownership change would occur if shareholders owning 5% or more of Hovnanian's stock increase their collective ownership by more than 50 percentage points over a defined period of time, the company stated.

Under the rights plan, one right will be distributed for each share of class A common stock and class B common stock of Hovnanian outstanding as of the close of business on Aug. 15.

Any person or group acquiring 4.9% or more of the outstanding shares of class A common stock of Hovnanian without the board's approval would trigger an event causing significant dilution in the voting power of such person or group, according to a Hovnanian news release.

Existing stockholders who currently own 4.9% or more of the outstanding shares of class A common stock will trigger a dilutive event only if they acquire additional shares.

The rights plan is effective until Aug. 15, 2018.

"A stockholder rights plan protects the interests of all stockholders from the possibility of losing the tax benefit of net operating loss carryforwards and built-in losses under section 382," president and chief executive officer Ara K. Hovnanian said in the release.

Hovnanian, a Red Bank, N.J.-based homebuilder, noted that the rights plan is not intended for defensive or anti-takeover purposes.

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