Moody's upgrades Hovnanian

Moody's Investors Service said it upgraded Hovnanian Enterprises, Inc.'s corporate family rating to Caa1 from Caa2 and probability of default rating to Caa1-PD from Caa2-PD.

The agency also affirmed the ratings on K. Hovnanian Enterprises, Inc.'s 1.125 lien and 1.25 lien senior secured notes due 2026 at Caa1 and its senior unsecured notes and senior unsecured term loans at Caa3.

The rating on Hovnanian's preferred stock was affirmed at Ca. The SGL-3 speculative grade liquidity ating is unchanged, and the outlook was changed to positive from stable.

“The corporate family rating upgrade to Caa1 reflects the reduced risk of restructuring activity given the improvement in Hovnanian's operating and financial performance and the extension of the company's debt maturity profile given the recent debt redemptions. Operating improvements include growth in revenue toward $2.5 billion, increase in gross margin above 17% and homebuilding interest coverage toward 1.5x. Hovnanian's recent voluntary make whole repayments of its senior secured notes due 2022 and 2024 with cash are positive credit considerations,” Moody’s said in a press release.

The outlook reflects expectations that over the next 12 to 18 months Hovnanian will continue generating growth in revenue and improve its credit metrics as it benefits from strong tailwinds in the homebuilding sector, and focuses on deleveraging and strengthening its balance sheet, the agency said.

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