Hovnanian amends 13½%, 5% notes, cures default on 8% notes due 2040

By Wendy Van Sickle

Columbus, Ohio, May 30 – Hovnanian Enterprises, Inc.’s wholly owned subsidiary, K. Hovnanian Enterprises, Inc., executed a supplemental indenture for its 13½% senior notes due 2026 and 5% senior notes due 2040 and paid the overdue interest on its 8% Sunrise Trail senior notes due 2019, according to an 8-K filing with the Securities and Exchange Commission.

All of these actions took place on Wednesday.

The payment of the overdue interest cured the default under the indenture governing the 8% notes.

The supplemental indenture to the 13½% and 5% notes provides for amendments consented to by holders of at least a majority in principal amount of the outstanding notes of each series.

It eliminates the covenant restricting certain actions with respect to the $26 million of 8% notes that are held by Hovnanian Enterprises wholly owned subsidiary K. Hovnanian at Sunrise Trail III, LLC.

The covenant had included requirements that K. Hovnanian and the guarantors of the notes would not prior to June 6 redeem, cancel, retire, purchase or acquire any Sunrise Trail 8% notes or make any interest payments on the notes prior to their stated maturity.

K. Hovnanian and the guarantors of the notes were also prohibited from selling, transferring, conveying, leasing or otherwise disposing of any of the 8% notes other than to any subsidiary of the company that was not K. Hovnanian or a guarantor of the notes and from amending, supplementing or otherwise modifying the 8% notes or their indenture, with some exceptions.

In addition to eliminating the restrictive covenant, the supplemental indenture also eliminates events of default related to the eliminated covenant.

Because the covenant had prohibited paying interest on the affiliate-held 8% notes, the issuer did not make the $1.04 million interest payment due on those affiliate-held notes on May 1. It did make the interest payment due on the notes on that date for all non-affiliate-held 8% notes, as previously reported.

Hovnanian is a Matawan, N.J., homebuilder.

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