Hovnanian extends, ups consideration in private exchange offers

By Jennifer Chiou

New York, Oct. 17 - Hovnanian Enterprises, Inc. announced that K. Hovnanian Enterprises, Inc. further extended the early tender and consent time of its private exchange offers, this time to midnight ET on Oct. 29. The prior early deadlines had been on Oct. 17 and Oct. 12.

The offers will expire at midnight ET on Oct. 29.

The company will accept tenders for any and all of its $130.4 million of outstanding 11 7/8% senior notes due 2015. (The outstanding amount was originally $137.6 million when the exchange was announced.)

The following notes are also eligible for the offers but subject to proration. They are listed in order of acceptance priority level, with the first three series all holding priority levels of 1:

• $53.4 million of 6½% senior notes due 2014;

• $29.2 million of 6 3/8% senior notes due 2014;

• $52.7 million of 6¼% senior notes due 2015;

• $173.2 million of 6¼% senior notes due 2016;

• $172.3 million of 7½% senior notes due 2016; and

• $195.9 million of 8 5/8% senior notes due 2017.

The withdrawal deadline was extended to midnight ET on Oct. 29 for the notes due in 2014 and 2015, while the withdrawal deadline for the remainder was left unchanged at 5 p.m. ET on Oct. 12.

In exchange for the existing notes due in 2014 and 2015, the company is now offering a like amount of new 5% senior secured notes due 2021 plus a cash payment of $100 per $1,000 principal amount of notes.

These notes will have the same terms - other than the interest rate and redemption provisions - as the previously announced up to $220 million of new 2% senior secured notes due 2021 to be issued in a private placement by K. Hovnanian Enterprises and guaranteed by Hovnanian. The new notes will be secured by assets that are not collateral for the company's existing secured debt.

Previously, the company was offering the new 2% notes and no cash for all series involved in the exchanges.

Both series of new notes have an equity clawback call option beginning Nov. 1, 2014. The redemption price would be 102 for the 2% notes and 105 for the 5% notes.

Holders of the notes due in 2016 and 2017 will receive a like amount of the new 2% notes in exchange for any accepted notes.

Accrued interest up to but excluding the settlement date will be paid in cash on all accepted notes.

As of Oct. 17, holders had tendered $13.3 million of the 6¼% notes due 2016, $20.6 million of the 7½% notes, $21.3 million of the 8 5/8% notes, $1.6 million of the 11 7/8% notes and none of the notes due in 2014 or the 6¼% notes due 2015.

If more than half of the outstanding 11 7/8% notes are tendered for exchange, the maximum amount of new notes to be issued will be $195 million. Otherwise, the maximum amount to be issued will be $220 million.

The company is also soliciting, for no consideration, from the holders of the 11 7/8% notes consents to proposed amendments to the indenture governing the notes that would eliminate substantially all of the restrictive covenants and some of the default provisions.

The company already said it will not accept any tender that would result in the issuance of less than $2,000 principal amount of the new notes.

The exchange offers and consent solicitation are not conditioned on a minimum principal amount of notes being tendered or the issuance of a minimum principal amount of the new notes. The consummation of the exchange offers is not conditioned on the consummation of the consent solicitation.

The company previously said that the offer is being made as part of its efforts to reduce its borrowing costs and improve its balance sheet in light of challenging homebuilding market conditions. These efforts may also include the repurchase of additional bonds for which the company has about $175 million of capacity remaining under applicable debt covenants.

The exchange offers are being made within the United States only to qualified institutional buyers under Rule 144A of the Securities Act and outside the United States to non-U.S. investors under Regulation S of the Securities Act.

The information agent is Global Bondholder Services Corp. (866 389-1500 or 212 430-3774).

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

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