Hovnanian updates exchange offers, consent solicitations for notes

By Marisa Wong

Los Angeles, Nov. 22 – Hovnanian Enterprises, Inc. said wholly owned subsidiary K. Hovnanian Enterprises, Inc. amended its private offers to exchange its $218,994,000 10% senior secured notes due 2022 and 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 and the related consent solicitations.

As announced on Nov. 4, 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.

On Thursday, the company said it made the following changes under the exchange offers and consent solicitation:

• Amended the definition of “permitted indebtedness” in the indenture governing the new 2025 notes to clarify the allocation of new notes issued in the exchange offers and in exchange for unsecured debt obligations; and

• Amended the consent solicitations to remove all references to the asset dispositions covenant being eliminated as part of the consent solicitations for the applicable series of old notes and to clarify that the proposed amendments under each of the consent solicitations will not affect the obligation of subsidiaries that are guarantors on the effective date of the applicable supplemental indenture giving effect to the applicable proposed amendments to continue to grant their assets as collateral for the old notes.

In addition, the company announced that if new 2025 notes are issued in an amount less than the offer cap, then the issuer expects to exchange some of its outstanding unsecured debt for debt that is secured on a pari passu basis with the new 2025 notes in an aggregate principal amount not to exceed the amount equal to the offer cap less the amount of new 2025 notes issued in the exchange offers. The terms of the new pari passu debt may differ from the new 2025 notes, the issuer noted.

As previously announced, the company is offering the following consideration in the exchange:

• 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 consideration includes a $5 early exchange premium for notes tendered by 5 p.m. ET on Nov. 18, the early deadline.

Holders will also receive accrued interest.

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

Tenders may no longer be withdrawn.

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.

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

If the exchange offer is oversubscribed, the issuer will accept 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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