By Angela McDaniels
Tacoma, Wash., Oct. 31 - Hovnanian Enterprises, Inc. announced that K. Hovnanian Enterprises, Inc. accepted $195 million of notes in the private exchange offers that expired at midnight ET on Oct. 29.
The company offered to exchange any and all of its $130.4 million of outstanding 11 7/8% senior notes due 2015.
The following notes were 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 offer results are noted in the table below.
In exchange for the notes due in 2014 and 2015, holders will receive a like amount of new 5% senior secured notes due 2021 plus a cash payment of $100 per $1,000 principal amount of notes.
In exchange for the notes due 2016 and 2017, holders will receive a like amount of new 2% senior secured notes due 2021.
In total, the company will issue $141.8 million of 5% notes and $53.2 million of 2% notes and pay $14.2 million in cash, excluding interest.
Holders will also receive accrued interest up to but excluding the settlement date, which is expected to be Nov. 1.
Because more than half of the outstanding 11 7/8% notes were tendered for exchange, the maximum amount of new notes to be issued is capped at $195 million. Otherwise, the cap would have been $220 million.
Because of the $195 million cap and their acceptance priority level, the 8 5/8% notes were accepted on a prorated basis. The proration factor is 89.9%.
The new notes will 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.
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.
The company also solicited, 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.
Enough consents were received to make the amendments.
The exchange offers and consent solicitation were 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 was not conditioned on the consummation of the consent solicitation.
The company previously said that the offer was 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 were 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 was Global Bondholder Services Corp. (866 389-1500 or 212 430-3774).
Hovnanian is a homebuilder based in Red Bank, N.J.
Hovnanian exchange offer
| Notes | Amount tendered | Percent tendered | Amount accepted
|
| 11 | 7/8% senior notes due 2015 | $67.6 million | 51.83% | $67.6 million
|
| 6½% senior notes due 2014 | $16.7 million | 31.33% | $16.7 million
|
| 6 | 3/8% senior notes due 2014 | $26.2 million | 89.68% | $26.2 million
|
| 6¼% senior notes due 2015 | $31.3 million | 59.34% | $31.3 million
|
| 6¼% senior notes due 2016 | $13.3 million | 7.69% | $13.3 million
|
| 7½% senior notes due 2016 | $20.7 million | 12.03% | $20.7 million
|
| 8 | 5/8% senior notes due 2017 | $21.3 million | 10.89% | $19.2 million
|
| Total | $197.1 million | $195 million
|
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