KB Home noteholders led by Whitebox Advisors say they will not consent to proposed amendment

By Angela McDaniels

Seattle, Nov. 6 - A group of KB Home noteholders said it will not provide consent during a consent solicitation for the company's notes that is scheduled to end at 5 p.m. ET on Nov. 7.

KB Home is soliciting consents from the holders of $1.65 billion of its senior notes to approve a proposed amendment to the indenture governing the notes that would suspend until Feb. 23 any event of default triggered by the company's failure to file its 10-Q report for the quarter ended Aug. 31 with the Securities and Exchange Commission on time.

Noteholders who consent will receive a cash consent fee of $7.50 per $1,000 principal amount of notes held.

The group of noteholders is lead by Whitebox Advisors, which said KB Home's current proposal significantly undervalues the contractual rights that bondholders would be giving up.

Whitebox said companies in similar circumstances have repeatedly offered more and cited several cases in which companies agreed to pay par (Navistar International Corp., SafeNet Inc., Saks Inc.), offered substantial consent fees (Novell Inc.'s offer of 575 basis points) or materially raised their coupon (BearingPoint Inc., an increase of 135 basis points).

KB Home received a notice of default for its 7¼% senior notes due 2018 for failure to file its 10-Q for the quarter ended Aug. 31 from an entity claiming to manage funds that own more than 25% of the notes. The company has 60 days to cure the default, and if it fails to do so, bondholders have the right to accelerate the bonds.

The consent would include waiver of cross-defaults. Whitebox said that because KB Home faces defaults on five bond issues, waiving cross-default provisions in one issue could involve substantial economic loss resulting from possible subordination if other issues are accelerated.

Whitebox said KB Home bondholders may contact it by calling Rob Vogel (612 253-6028).

Whitebox, along with one other holder, holds 36% of the company's 6¼% bonds. Whitebox said it also received oral commitments to withhold consents from holders of 39% of KB Home's 5 7/8% bonds.

KB Home has not filed the 10-Q report because it has not completed an internal review of its historical stock option grants and related accounting, according to a company news release. KB Home intends to file the 10-Q report on or before Dec. 24.

Global Bondholder Services Corp. (866 470-3800 or 212 430-3774) is information agent and tabulation agent for the consent solicitation. Banc of America Securities LLC (888 292-0070 or 704 388-4813) and Citigroup Corporate and Investment Banking (800 558-3745) are joint solicitation agents.

KB Home is a Los Angeles-based builder of single-family homes.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.