Hovnanian offers to exchange 10%, 10½% notes for 10% 1.75-lien notes

By Sarah Lizee

Olympia, Wash., Nov. 5 – Hovnanian Enterprises, Inc. said wholly owned subsidiary K. Hovnanian Enterprises, Inc. launched a private offer to exchange its $218,994,000 10% senior secured notes due 2022 and a private offer to exchange its $211,391,000 10½% senior secured notes due 2024 for up to $240 million of newly issued 10% 1.75-lien notes due 2025.

In conjunction with the exchange offers, the issuer is soliciting consents to proposed amendments from the holders of the old 2022 and 2024 notes to eliminate most of the restrictive covenants, some of the affirmative covenants and some of the events of default in the indentures.

Holders of old notes may not consent to the applicable proposed amendments without tendering their old notes in the applicable exchange offer, and vice versa.

The consideration offered in the exchange is as follows:

• For every $1,000 of old notes due 2022, $1,005 principal amount of new 2025 notes; and

• For every $1,000 of old notes due 2024, $955 principal amount of new 2025 notes.

The notes are listed in order of acceptance priority level.

Holders will also receive accrued interest.

The consideration includes a $5 early exchange premium.

Holders who tender their notes by the early deadline, 5 p.m. ET on Nov. 18, will be eligible to receive the early exchange premium.

The exchange offers will expire at 11:59 p.m. ET on Dec. 5.

Tenders may be withdrawn until the early deadline.

Any and all validly tendered old 2022 notes will be accepted for exchange into new 2025 notes, and validly tendered old 2024 notes will be accepted for exchange at the acceptance priority level into new 2025 notes, unless and until the new notes cap is reached.

If new 2025 notes are issued in an amount less than the new notes cap, then following the completion of the exchange offers, the company will offer to exchange the issuer’s senior unsecured term loans due 2027 for debt that is secured on a pari passu basis with the new 2025 notes to be issued or borrowed in an amount equal to the new notes cap less the amount of new 2025 notes issued in the exchange offers.

If acceptance of all validly tendered old 2024 notes, together with all validly tendered old 2022 notes, would cause the issuer to accept a principal amount of old notes that would result in an issuance of new 2025 notes greater than the new notes cap, then the exchange offer will be oversubscribed, and the issuer will accept for exchange tendered old 2024 notes on a prorated basis.

Settlement is expected to be on Dec. 10.

Global Bondholder Services Corp. (866 470-3800 or 212 430-3774) is the exchange agent and information agent.

Hovnanian is a Matawan, N.J., homebuilder.

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