Hovnanian Enterprises, Inc. (NYSE:HOV) (the “Company”) announced
today that its wholly-owned subsidiary, K. Hovnanian Enterprises,
Inc. (the “Issuer”), has commenced a private offer to eligible
holders to exchange (the “Exchange Offer”) any and all of the
Issuer’s $440,000,000 outstanding 10.000% Senior Secured Notes due
2022 (the “Existing 2022 Notes”) and $400,000,000 outstanding
10.500% Senior Secured Notes due 2024 (together with the Existing
2022 Notes, the “Existing Notes”) for the Issuer’s newly issued
3.0% Senior Notes due 2047 (the “New Notes”) on the terms and
subject to the conditions set forth in a Confidential Offering
Memorandum, dated April 6, 2018 (as it may be amended or
supplemented from time to time, the “Offering Memorandum”), and in
the related Letter of Transmittal and Consent (as it may be amended
or supplemented from time to time, and, collectively with the
Offering Memorandum, the “Exchange Offer Documents”).
The Exchange Offer will expire at 11:59 p.m.,
New York City time, on May 3, 2018, unless extended or earlier
terminated (such time and date, as the same may be extended, the
“Expiration Time”). In order to receive the Exchange Consideration
(as defined below) on the Early Settlement Date (as defined below),
eligible holders must validly tender their Existing Notes prior to
5:00 p.m., New York City time, on April 19, 2018, unless extended
(such time and date, as the same may be extended, the “Early Tender
Deadline”). Eligible holders who validly tender their Existing
Notes after the Early Tender Deadline but on or prior to the
Expiration Time will receive the Exchange Consideration on the
Final Settlement Date (as defined below). Existing Notes tendered
may be withdrawn at any time prior to 5:00 p.m., New York City
time, on April 19, 2018, unless extended (as the same may be
extended, the “Withdrawal Deadline”), but not thereafter, unless
required by applicable law.
In exchange for each $1,000 principal amount of
Existing Notes and integral multiples thereof validly tendered by
eligible holders (and not validly withdrawn prior to the Withdrawal
Deadline) prior to the Early Tender Deadline or the Expiration
Time, as applicable, and accepted by us, participating holders of
Existing Notes will receive $1,250 principal amount of New Notes
plus accrued and unpaid interest, if any, to, but excluding, the
applicable settlement date on such Existing Notes (the “Exchange
Consideration”) on the Early Settlement Date or Final Settlement
Date, as applicable. If New Notes are issued in exchange for the
Existing Notes on the Early Settlement Date, holders who receive
New Notes in exchange for Existing Notes on the Final Settlement
Date will receive New Notes that will have an embedded entitlement
to interest (“pre-issuance interest”) for the period from and
including the Early Settlement Date to, but excluding, the Final
Settlement Date. As a result, the cash payable for accrued and
unpaid interest on the Existing Notes exchanged on the Final
Settlement Date will be reduced by the amount of the pre-issuance
interest on the New Notes exchanged therefor. The aggregate
Exchange Consideration issued in respect of each participating
holder for all Existing Notes validly tendered (and not validly
withdrawn prior to the Withdrawal Deadline) and accepted by us will
be rounded down, if necessary, to $2,000 or the nearest whole
multiple of $1,000 in excess thereof. This rounded amount will be
the principal amount of New Notes you will receive as part of your
Exchange Consideration, and no additional cash will be paid in lieu
of any principal amount of New Notes not received as a result of
such rounding down. Any such adjustment will apply to all Existing
Notes tendered and accepted in the Exchange Offer.
The Issuer’s obligation to accept for exchange
any Existing Notes validly tendered and not validly withdrawn
before the Withdrawal Deadline pursuant to the Exchange Offer is
conditioned upon the satisfaction or, if applicable, waiver of
certain conditions, which are more fully described in the Offering
Memorandum, including, among others, at least $150.0 million in
aggregate principal amount of the Existing Notes having been
validly tendered (and not validly withdrawn prior to the Withdrawal
Deadline) by holders thereof prior to the Early Tender Deadline,
and certain other conditions.
Assuming that the conditions to the Exchange
Offer are satisfied or waived, the Issuer intends for the “Early
Settlement Date” to occur promptly after the Early Tender Deadline.
It is anticipated that the Early Settlement Date will be the second
business day after the Early Tender Deadline. The Issuer reserves
the right, in its sole discretion, to designate the Early
Settlement Date at any date following the Early Tender Deadline.
Assuming that the conditions to the Exchange Offer are satisfied or
waived, the “Final Settlement Date” will be promptly after the
Expiration Time and is expected to be the business day after the
Expiration Time.
In conjunction with the Exchange Offer, the
Issuer is soliciting consents (the “Existing 2022 Notes Consent
Solicitation”) from the holders of the Existing 2022 Notes to amend
(the “Proposed Amendment”) the indenture (the “Indenture”)
governing the Existing 2022 Notes. The Existing 2022 Notes Consent
Solicitation is being made in accordance with the terms and subject
to the conditions stated in the Offering Memorandum. Holders of
Existing 2022 Notes may not consent to the Proposed Amendment
without tendering their Existing 2022 Notes in the Exchange Offer
and holders of Existing 2022 Notes may not tender their Existing
2022 Notes in the Exchange Offer without consenting to the Proposed
Amendment. The consummation of the Existing 2022 Notes Consent
Solicitation is subject, among other things, to the receipt of the
consent of the holders of at least a majority in aggregate
principal amount of the outstanding Existing 2022 Notes. The
Existing 2022 Notes Consent Solicitation will expire with the
Exchange Offer at the Expiration Time.
The purpose of the Existing 2022 Notes Consent
Solicitation is to obtain from holders of the Existing 2022 Notes
approval of the Proposed Amendment to eliminate the restrictions on
the Issuer’s ability to purchase, repurchase, redeem, acquire or
retire for value the Issuer’s 8.000% Senior Notes due 2019 and
refinancing or replacement indebtedness in respect thereof and
refinancing or replacement indebtedness in respect of the Issuer’s
previously outstanding 7.000% Senior Notes due 2019, including the
Issuer’s 5.0% Senior Notes due 2040, 13.5% Senior Notes due 2026
and unsecured term loan facility.
Documents relating to the Exchange Offer and
Existing 2022 Notes Consent Solicitation will only be distributed
to holders of Existing Notes who complete a letter of eligibility
confirming that they are within the category of holders that are
eligible to participate in this private offer. To access the letter
of eligibility, click on the following link:
http://gbsc-usa.com/eligibility/khov.
The obligations under the New Notes will be
fully and unconditionally guaranteed by the Company, and
substantially all of its subsidiaries, other than the issuer of the
New Notes, the Company’s home mortgage subsidiaries, certain of its
title insurance subsidiaries, joint ventures, subsidiaries holding
interests in joint ventures and its foreign subsidiary.
The New Notes will bear interest at the rate of
3.0% per year, accruing from the date of initial issuance. Interest
on the New Notes will be payable on April 15 and October 15 of each
year, beginning on October 15, 2018. The New Notes will mature on
April 15, 2047. We may redeem some or all of the New Notes on or
after the times, and at the redemption prices, specified in the
Offering Memorandum.
Global Bondholder Services Corporation is
serving as the exchange agent, tabulation agent and information
agent for the Exchange Offer and Existing 2022 Notes Consent
Solicitation. Any question regarding procedures for tendering
Existing Notes and delivering consents in the Existing 2022 Notes
Consent Solicitation and requests for copies of the Exchange Offer
Documents may be directed to Global Bondholder Services by phone at
866-470-4300 (toll free) or 212-430-3774.
This press release is neither an offer to
purchase or sell nor a solicitation of an offer to sell or buy the
Existing Notes, the New Notes or any other securities of the Issuer
or the Company. This press release also is not a solicitation of
consents to the Proposed Amendment to the indenture governing the
Existing 2022 Notes. The Exchange Offer and Existing 2022 Notes
Consent Solicitation are being made solely on the terms and subject
to the conditions set forth in the Exchange Offer Documents and the
information in this press release is qualified by reference to such
Exchange Offer Documents.
The Exchange Offer is being made within the
United States only to persons reasonably believed to be “qualified
institutional buyers” pursuant to Rule 144A under the Securities
Act of 1933, as amended (the “Securities Act”), and outside the
United States to non-U.S. investors. The New Notes have not been
and will not be registered under the Securities Act or any state
securities laws. The New Notes may not be offered or sold within
the United States or to U.S. persons, except pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable
state securities laws.
About Hovnanian Enterprises
Hovnanian Enterprises, Inc., founded in 1959 by
Kevork S. Hovnanian, is headquartered in Matawan, New Jersey. The
Company is one of the nation’s largest homebuilders with operations
in Arizona, California, Delaware, Florida, Georgia, Illinois,
Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas,
Virginia, Washington, D.C. and West Virginia. The Company’s homes
are marketed and sold under the trade names K. Hovnanian® Homes,
Brighton Homes® and Parkwood Builders. As the developer of K.
Hovnanian’s® Four Seasons communities, the Company is also one of
the nation’s largest builders of active lifestyle communities.
Forward-Looking Statements
All statements in this press release that are
not historical facts should be considered as “Forward-Looking
Statements.” Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results,
performance or achievements of the Company to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such
forward-looking statements include but are not limited to
statements related to the Company’s goals and expectations with
respect to its financial results for future financial periods.
Although we believe that our plans, intentions and expectations
reflected in, or suggested by, such forward-looking statements are
reasonable, we can give no assurance that such plans, intentions or
expectations will be achieved. By their nature, forward-looking
statements: (i) speak only as of the date they are made, (ii) are
not guarantees of future performance or results and (iii) are
subject to risks, uncertainties and assumptions that are difficult
to predict or quantify. Therefore, actual results could differ
materially and adversely from those forward-looking statements as a
result of a variety of factors. Such risks, uncertainties and other
factors include, but are not limited to, (1) changes in general and
local economic, industry and business conditions and impacts of a
sustained homebuilding downturn; (2) adverse weather and other
environmental conditions and natural disasters; (3) levels of
indebtedness and restrictions on the Company’s operations and
activities imposed by the agreements governing the Company’s
outstanding indebtedness; (4) the Company's sources of liquidity;
(5) changes in credit ratings; (6) changes in market conditions and
seasonality of the Company’s business; (7) the availability and
cost of suitable land and improved lots; (8) shortages in, and
price fluctuations of, raw materials and labor; (9) regional and
local economic factors, including dependency on certain sectors of
the economy, and employment levels affecting home prices and sales
activity in the markets where the Company builds homes; (10)
fluctuations in interest rates and the availability of mortgage
financing; (11) changes in tax laws affecting the after-tax costs
of owning a home; (12) operations through joint ventures with third
parties; (13) government regulation, including regulations
concerning development of land, the home building, sales and
customer financing processes, tax laws and the environment; (14)
product liability litigation, warranty claims and claims made by
mortgage investors; (15) levels of competition; (16) availability
and terms of financing to the Company; (17) successful
identification and integration of acquisitions; (18) significant
influence of the Company’s controlling stockholders; (19)
availability of net operating loss carryforwards; (20) utility
shortages and outages or rate fluctuations; (21) geopolitical
risks, terrorist acts and other acts of war; (22) increases in
cancellations of agreements of sale; (23) loss of key management
personnel or failure to attract qualified personnel; (24)
information technology failures and data security breaches; (25)
legal claims brought against us and not resolved in our favor; and
(26) certain risks, uncertainties and other factors described in
detail in the Company’s Annual Report on Form 10-K for the fiscal
year ended October 31, 2017 and in the Offering Memorandum. Except
as otherwise required by applicable securities laws, we undertake
no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events,
changed circumstances or any other reason.
Contact:
Jeffrey T. O’Keefe Vice President of Investor
Relations 732-747-7800
Ethan Lyle Teneo Strategy 212-886-9376
Hovnanian Enterprises (NYSE:HOV)
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