Moody’s ups Hovnanian, rates notes Caa3

Moody's Investors Service said it upgraded Hovnanian Enterprises, Inc.’s corporate family rating to Caa1 from Caa2.

The company's speculative-grade liquidity rating was upgraded to SGL-3 from SGL-4 to indicate the improvement in its liquidity profile.

In conjunction, Moody's also downgraded the company's probability of default to Ca-PD/LD in order to indicate the distressed exchange that took place among the company and the holders of its 7% senior notes due 2019 and 8% senior notes due 2019.

“We anticipate to upgrade the probability of default rating to Caa1 shortly,” the agency said in a news release.

Moody's also assigned Caa3 ratings to K. Hovnanian Enterprises, Inc.'s 13˝% senior unsecured notes due 2026 and 5% senior unsecured notes due 2040.

The agency said upgrade reflects the company’s strides in reducing its near-to-midterm refinancing risk, and Moody’s believes that Hovnanian generates sufficient unleveraged free cash flow to cover its interest burden for the next 12-18 months.

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