Hovnanian Enterprises plans $90 million five-year exchangeable units to yield 5.5%-6%, up 35%-40%

By Rebecca Melvin

New York, Sept. 18 - K. Hovnanian Enterprises Inc., a subsidiary of Hovnanian Enterprises Inc., launched an offering of $90 million of five-year exchangeable note units late Tuesday at par of $1,000 that were talked to yield 5.5% to 6% with a 35% to 40% initial conversion premium, according to a market source.

Concurrently with the offering, K. Hovnanian plans to issue up to $550 million of senior secured first-lien notes due 2020 and $247 million of senior secured second-lien notes due 2020 in a private placement.

The exchangeable notes are contingent on the secured notes offering.

The exchangeable notes, which are non-callable with no puts, have a $10 million greenshoe, and pricing is expected after the market close on Wednesday.

The registered notes were being sold via bookrunners Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds from the units offering and the notes offering are earmarked to fund a tender offer and consent solicitation for any and all of its outstanding 10.625% senior secured notes due 2016.

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

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