S&P rates Hovnanian notes CC

Standard & Poor's said it assigned its preliminary CC rating to K. Hovnanian Enterprises Inc.'s proposed senior secured notes due 2021.

S&P said it also assigned a preliminary 5 recovery rating to the proposed notes, which assumes a modest recovery in the event of payment default. The notes will be guaranteed by Hovnanian Enterprises Inc., K. Hovnanian's parent, according to an S&P news release.

The issue-level rating is based on the assumption that the company will issue the maximum amount contemplated in the its proposed debt exchange offer, the agency said. Through the debt exchange offer, the company would issue a maximum of $195 million or $220 million of new 5% and 2% senior secured notes in exchange for certain of its senior unsecured notes with maturities ranging from 2014 to 2017, according to S&P.

S&P said it may revisit the rating on the new senior secured notes depending on the outcome of the issuance. In the event the company issues a lesser amount, the highest rating that S&P would assign is a CCC-, based on an expected corporate credit rating of CCC- following the completion of the exchange offer, the agency said.

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