Hovnanian subsidiary completes tender offers for nine series of notes

By Susanna Moon

Chicago, July 21 - Hovnanian Enterprises, Inc. subsidiary K. Hovnanian Enterprises Inc. said it will purchase all of the $17,807,000 principal amount of 6% senior subordinated notes due 2010 tendered in its offer.

Hovnanian will spend $36.1 million to purchase the $49,428,000 tendered 8% senior notes due 2012, 8 7/8% senior subordinated notes due 2012 and 7¾% senior subordinated notes due 2013.

The company will spend $26.9 million to buy some of the $303,435,000 tendered 6½% senior notes due 2014, 6 3/8% senior notes due 2014, 6¼% senior notes due 2015, 6¼% senior notes due 2016, 7½% senior notes due 2016 and 8 5/8% senior notes due 2017. Hovnanian will accept the notes in the oversubscribed offer on a pro rata basis.

For each of the notes due 2014 through 2017, the total payment is a base price plus a clearing premium of $40 per $1,000 principal amount of the notes purchased.

Hovnanian began a fixed-price tender offer for its $28.87 million of 6% notes on June 22 as well as Dutch auction tender offers for eight additional series of notes.

Under one Dutch auction tender offer, the company offered to buy the maximum principal amount of its $88,174,000 of 8% notes, $70,935,000 of 8 7/8% notes and $96,225,000 of 7¾% notes that it can purchase for $40 million.

In the other, K. Hovnanian offered to buy the maximum principal amount of its $144,149,000 of 6½% notes, $115,313,000 of 6 3/8% notes, $135,403,000 of 6¼% notes, $182,405,000 of 6¼% notes, $196,652,000 of 7½% notes and $207,178,000 of 8 5/8% notes that it can purchase for $20 million.

The offers expired at 8 a.m. ET on July 20, and the early participation date for each offer was 5 p.m. ET on July 2. The payment date is expected to be Tuesday.

As previously noted, holders who tendered by the early participation date will receive the total tender consideration, which includes an early participation payment of $30 for each $1,000 principal amount of notes.

All holders who tendered will receive accrued interest up to but excluding the payment date.

Fixed-price offer

The payment on offer for the 6% notes due 2010 is $985 for each $1,000 principal amount of notes, including the early participation payment.

Holders who tendered after the early participation date but prior to the expiration date will receive $955 per $1,000 principal amount of notes.

Dutch tender offers

The total amount payable to holders was determined based on a formula consisting of a base price per $1,000 principal amount of notes plus a clearing premium that was determined through the modified Dutch auction.

In the first Dutch auction tender offer, holders who tendered were to specify a bid price of between $650 and $750 for the 8% notes, between $500 and $600 for the 8 7/8% notes and between $400 and $500 for the 7¾% notes.

In the second Dutch auction tender offer, holders who tendered were to specify a bid price of between $480 and $580 per note.

The clearing premium is the lowest single premium such that for all notes tendered at or below this single lowest premium, K. Hovnanian will be able to purchase the greatest principal amount of notes for $40 million in the case of the first offer and $20 million in the case of the second offer.

The tender offers were conditioned on the satisfaction of some customary conditions. They were not conditioned on financing, any minimum amount of notes being tendered or the consummation of any of the other tender offers.

The dealer managers are Citi (800 558-3745 or 212 723-6106), Banc of America Securities LLC (888 292-0070 or 980 388-9217) and Wachovia Securities (866 309-6316 or 704 715-8341).

Bondholder Communications Group (888 385-2663) is the information agent.

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

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