Hovnanian enters two credit agreements totaling $337.5 million

By Wendy Van Sickle

Columbus, Ohio, Feb. 2 – Hovnanian Enterprises, Inc. entered into a credit agreement on Monday providing for an up to $212.5 million senior unsecured term loan and a separate credit agreement providing for up to $125 million of secured first-lien loans, both to be borrowed by its subsidiary K. Hovnanian Enterprises, Inc., according to an 8-K filing with the Securities and Exchange Commission.

Wilmington Trust, NA is the administrative agent of both credit agreements.

$212.5 million term loan

The credit agreement provides for $132.5 million of initial term loans, which were borrowed on Friday to redeem K. Hovnanian’s 7% senior notes due 2019, and up to $80 million of delayed-draw term loans available beginning May 28 to refinance some of K. Hovnanian’s 8% senior notes due 2019.

The term loans are due Feb. 1, 2027 and bear annual interest of 5%.

$125 million first-lien loans

The first-lien loans are to fund the repayment of K. Hovnanian’s existing $75 million first-lien term loan and for general corporate purposes.

Availability under the agreement terminates on Dec. 28, 2019, and any secured loans outstanding on that date will convert to secured term loans maturing on Dec. 28, 2022.

When available to be drawn, the secured loans and their guarantees will be secured by substantially all of the assets owned by K. Hovnanian, the parent and substantially all of its subsidiaries, subject to permitted liens and certain exceptions, on a first-lien basis relative to the liens securing K. Hovnanian’s 10% senior secured notes due 2022 and 10½% senior secured notes due 2024.

The secured loans will bear interest equal to the lesser of 10% a year and the volume weighted average yield of the 2024 notes, if available, or if not, the volume weighted average yield of K. Hovnanian’s secured debt securities having the largest traded volume during the applicable period minus 50 basis points.

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

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