Hovnanian Enterprises, Inc. (NYSE: HOV) (the “Company”) announced
today that its wholly-owned subsidiary, K. Hovnanian Enterprises,
Inc. (the “Issuer”), has commenced (i) a private offer to exchange
(the “Old 2022 Notes Exchange Offer”) the Issuer’s 10.000% Senior
Secured Notes due 2022 (the “Old 2022 Notes”) and (ii) a private
offer to exchange (the “Old 2024 Notes Exchange Offer” and,
together with the “Old 2022 Notes Exchange Offer,” the “Exchange
Offers”) the Issuer’s 10.500% Senior Secured Notes due 2024 (the
“Old 2024 Notes” and, together with the Old 2022 Notes, the “Old
Notes”) for up to $240.0 million aggregate principal amount of the
Issuer’s newly issued 10.000% 1.75 Lien Notes due 2025 (the “New
2025 Notes”). In conjunction with the Exchange Offers, the Issuer
is soliciting (i) consents (the “Old 2022 Notes Consents”) to
proposed amendments from the holders of the Old 2022 Notes (the
“Old 2022 Notes Consent Solicitation”) to the indenture, dated as
of July 27, 2017 (as amended and supplemented prior to the proposed
amendments, the “Old Notes Indenture”), among the Issuer, the
Company and the other guarantors parties thereto and Wilmington
Trust, National Association, as trustee and as collateral agent,
providing for, among other matters, the elimination of most of the
restrictive covenants, certain of the affirmative covenants and
certain of the events of default contained in the Old Notes
Indenture applicable to the Old 2022 Notes (the “Old 2022 Notes
Proposed Amendments”) and (ii) consents (the “Old 2024 Notes
Consents” and, together with the Old 2022 Notes Consents, the “Old
Notes Consents”) to proposed amendments from the holders of the Old
2024 Notes (the “Old 2024 Notes Consent Solicitation” and, together
with the Old 2022 Notes Consent Solicitation, the “Consent
Solicitations”) to the Old Notes Indenture providing for, among
other matters, the elimination of most of the restrictive
covenants, certain of the affirmative covenants and certain of the
events of default contained in the Old Notes Indenture applicable
to the Old 2024 Notes (the “Old 2024 Notes Proposed Amendments”
and, together with the Old 2022 Notes Proposed Amendments, the
“Proposed Amendments”). Holders of Old Notes may not consent to the
applicable Proposed Amendments without tendering their Old Notes in
the applicable Exchange Offer and holders of Old Notes may not
tender their Old Notes in the applicable Exchange Offer without
consenting to the applicable Proposed Amendments with respect to
such Old Notes. The Exchange Offers and Consent Solicitations are
being made on the terms and subject to the conditions set forth in
a Confidential Offering Memorandum and Consent Solicitation
Statement, dated November 4, 2019 (as it may be amended or
supplemented from time to time, the “Offering Memorandum”).
The consideration offered in the Exchange Offers
is set forth below :
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Consideration per $1,000 Principal Amount of Old Notes
Tendered |
Title of Series |
CUSIP/ISIN Numbers |
Principal Amount Outstanding |
Acceptance Priority Level |
Early Participation Consideration (if tendered at or prior
to the Early Participation Deadline)(1)(2) |
Exchange Consideration(1)(2) |
10.000% Senior Secured Notes due
2022........ |
442488 CD2 / US442488CD24;U48654 AV6 / USU48654AV61 |
$218,994,000 |
1 |
$1,005 principal amount of New 2025 Notes |
$1,000 principal amount of New 2025 Notes |
10.500% Senior Secured Notes due
2024........ |
442488 CE0 / US442488CE07; U48654 AW4 / USU48654AW45 |
$211,391,000 |
2 |
$955 principal amount of New 2025 Notes |
$950 principal amount of New 2025 Notes |
(1) For each $1,000 principal amount of Old Notes, subject to
any rounding as described herein.(2) Plus accrued and unpaid
interest on the Old Notes, if any, to, but excluding, the
Settlement Date (as defined below).
The Exchange Offers and the Consent
Solicitations will expire at 11:59 p.m., New York City time, on
December 5, 2019, unless extended or earlier terminated by the
Issuer (such date and time, as the same may be extended or earlier
terminated, the “Expiration Date”).
Eligible holders who validly tender and do not
validly withdraw their Old Notes (and deliver the related Old Notes
Consents) prior to 5:00 p.m., New York City time, on November 18,
2019, unless extended by the Issuer (such date and time, as it may
be extended, the “Early Participation Date”), and whose Old Notes
are accepted by the Issuer pursuant to the terms of the applicable
Exchange Offer, will receive consideration in the form of New 2025
Notes in an amount equal to the early participation consideration
(the “Early Participation Consideration”) applicable to such Old
Notes as shown in the table above.
Eligible holders who validly tender their Old
Notes (and deliver the related Old Notes Consents) after the Early
Participation Date, and at or prior to the Expiration Date, and
whose Old Notes are accepted by the Issuer pursuant to the terms of
the applicable Exchange Offer, will receive consideration in the
form of New 2025 Notes in an amount equal to the exchange
consideration (the “Exchange Consideration”) applicable to such Old
Notes as shown in the table above.
In addition, eligible holders whose Old Notes
are accepted for exchange will receive a cash payment representing
accrued and unpaid interest on such Old Notes to, but not
including, the Settlement Date, and amounts due in lieu of
fractional amounts of New 2025 Notes.
Tenders of Old Notes (and delivery of the
related Old Notes Consents) made prior to 5:00 p.m., New York City
time, on November 18, 2019, unless extended by the Issuer (such
date and time, as it may be extended, the “Withdrawal Deadline”)
may be validly withdrawn at any time at or prior to the Withdrawal
Deadline. Tenders of Old Notes (and delivery of the Old Notes
Consents) made after the Withdrawal Deadline and at or prior to the
Expiration Date will be irrevocable, except in certain limited
circumstances where additional withdrawal rights are required by
law. The Early Participation Date can be extended independently of
the Withdrawal Deadline.
The aggregate principal amount of Old Notes that
are accepted for exchange in the Exchange Offers will be based on
the order of acceptance priority for such series set forth in the
table above (the “Acceptance Priority Levels”), such that the
aggregate principal amount of Old Notes accepted in the Exchange
Offers results in the issuance of New 2025 Notes in an aggregate
principal amount not to exceed $240,000,000 (the “New Notes Cap”).
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 set
forth above into New 2025 Notes, unless and until the New Notes Cap
is reached. If, in connection with the Exchange Offers, New 2025
Notes are issued in an amount less than the New Notes Cap, then,
following the completion of the Exchange Offers, we will offer to
exchange the Issuer’s senior unsecured term loans due 2027 (the
“2027 Term Loans”) for debt that is secured on a pari passu basis
with the New 2025 Notes (the “New Pari Passu Debt”) to be issued or
borrowed by the Issuer and guaranteed by the Guarantors in an
amount equal to the New Notes Cap less the amount of New 2025 Notes
issued in the Exchange Offers.
Subject to the terms and conditions of the
Exchange Offers, the Issuer will accept for exchange the Old Notes
of any series validly tendered in the Exchange Offers in accordance
with the applicable Acceptance Priority Level (in numerical
priority order) for such series, as set forth in the table above,
with Acceptance Priority Level 1 being the highest priority level,
such that the aggregate principal amount of Old Notes accepted in
the Exchange Offers is an amount of Old Notes that results in the
issuance of New 2025 Notes in an aggregate principal amount not to
exceed the New Notes Cap. 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 Old 2024 Notes Exchange Offer will be
oversubscribed, and the Issuer will accept for exchange tendered
Old 2024 Notes on a prorated basis, with the aggregate principal
amount of each holder’s validly tendered Old 2024 Notes accepted
for exchange determined by multiplying the aggregate principal
amount of Old 2024 Notes tendered by each holder by the applicable
proration factor, and rounding the product down to the nearest
$1,000 principal amount for such series. Depending on the amount
tendered, and the proration factor applied, if the principal amount
of Old Notes returned to a holder as a result of proration would
result in less than the minimum denomination being returned to such
holder, the Issuer will either accept or reject all of such
holder’s validly tendered Old 2024 Notes. The settlement date for
the Exchange Offers is expected to be on or about the third
business day following of the Expiration Date or as soon as
practicable thereafter, which is expected to be December 10, 2019
(the “Settlement Date”).
Holders shall only be entitled to receive the
Early Participation Consideration or the Exchange Consideration, as
applicable, for all Old Notes validly tendered by such holder prior
to the Expiration Date (and not validly withdrawn prior to the
Withdrawal Deadline) and accepted by the Issuer. The aggregate
Early Participation Consideration or Exchange Consideration in
respect of each participating holder for all Old Notes validly
tendered (and not validly withdrawn prior to the Withdrawal
Deadline) and accepted by the Issuer 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 2025 Notes you will receive as part of your Early Participation
Consideration or Exchange Consideration, as applicable, and we will
pay cash in lieu of any principal amount of New 2025 Notes not
received as a result of such rounding down equal to the principal
amount of such New 2025 Notes. Any such adjustment will apply
to all Old Notes tendered and accepted in the Exchange Offers.
Subject to applicable law, we may (i) extend or
otherwise amend the Early Participation Date and the Expiration
Date with respect to an Exchange Offer and/or a Consent
Solicitation or (ii) decrease the New Notes Cap, in each case
without extending the Withdrawal Deadline for such Exchange Offer
or otherwise reinstating withdrawal rights of holders of Old
Notes. Each Exchange Offer and Consent Solicitation is a
separate offer, and each Exchange Offer and Consent Solicitation
may be individually amended, extended, terminated or withdrawn
without amending, extending, terminating or withdrawing any other
Exchange Offer or Consent Solicitation.
The Issuer’s obligation to accept for exchange
any Old Notes validly tendered and not validly withdrawn before the
Withdrawal Deadline pursuant to the Exchange Offers is conditioned
upon the satisfaction or, if applicable, waiver of certain
conditions, which are more fully described in the Offering
Memorandum. However, the consummation of the Exchange Offers
is not conditioned upon the receipt of the Requisite Consents (as
defined below) to approve the applicable Proposed Amendments or the
execution and delivery of the Supplemental Indentures giving effect
to the Proposed Amendments. Documents relating to the Exchange
Offers will be distributed only to holders of Old 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. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the
Exchange Offers or Consent Solicitations.
The valid consent (which has not been validly
revoked) of the holders of at least a majority in aggregate
principal amount of the outstanding Old Notes of each series (the
“Old Notes Requisite Consent”) is required for the adoption of the
applicable Proposed Amendments for such series and for the
supplemental indentures giving effect to the Proposed Amendments
for such series (each, a “Supplemental Indenture”) to be approved
and binding on the holders of such Old Notes. In the event that the
Old Notes Requisite Consents are received for a series of Old
Notes, the Issuer, the Company and the other guarantors party to
the Old Notes Indenture and the trustee and collateral agent under
the Old Notes Indenture will execute the applicable Supplemental
Indenture setting forth and giving effect to the applicable
Proposed Amendments that will become effective upon execution. It
is expected that the Supplemental Indenture giving effect to the
applicable Proposed Amendments will be executed promptly following
receipt of the applicable Requisite Consents, which may occur prior
to the Expiration Date but in no event will occur prior to the
later of the Early Participation Date and the Withdrawal Deadline.
However, each Supplemental Indenture, by its terms, will provide
that the applicable Proposed Amendments will not become operative
unless and until the Early Participation Consideration or the
Exchange Consideration, in each case applicable to the applicable
series of Old Notes and as applicable, is paid to tendering holders
of applicable Old Notes at the Settlement Date. If the Proposed
Amendments become effective with respect to a series of Old Notes,
all holders of such series of Old Notes, including non-tendering
holders of such series of Old Notes, will be bound thereby. The Old
Notes Indenture, without giving effect to the Proposed Amendments,
will remain in effect until the Proposed Amendments become
operative by their terms.
Holders are advised to check with any
bank, securities broker or other intermediary through which they
hold any of the Old Notes as to when such intermediary needs to
receive instructions from a holder in order for that holder to be
able to participate in, or (in the circumstances in which
revocation is permitted) revoke their instruction to participate
in, the Exchange Offers or Consent Solicitations, before the
deadlines specified herein and in the Offering Memorandum. The
deadlines set by each clearing system for the submission and
withdrawal of tender instructions will also be earlier than the
relevant deadlines specified herein and in the Offering
Memorandum.
The obligations under the New 2025 Notes will be
fully and unconditionally guaranteed by the Company, and
substantially all of its subsidiaries, other than the issuer of the
New 2025 Notes, the Company’s home mortgage subsidiaries, certain
of its title insurance subsidiaries, joint ventures and
subsidiaries holding interests in joint ventures. The New 2025
Notes will bear interest at the rate of 10.000% per year, accruing
from the date of issuance. Interest on the New 2025 Notes
will be payable semi-annually, in arrears on May 15 and November 15
of each year, beginning on May 15, 2020. The New 2025 Notes will
mature on November 15, 2025. We may redeem some or all of the New
2025 Notes on or after the times, and at the redemption prices,
specified in the Offering Memorandum.
If the Old 2024 Notes Exchange Offer is
oversubscribed and we accept for exchange tendered Old 2024 Notes
on a prorated basis, then the consents delivered with respect to
such Old 2024 Notes will be null and void, but the validity of such
Old 2024 Notes tendered shall be unaffected (even if the amount
accepted by us is greater than 50%).
None of us, the Dealer Manager (as
defined below), the Exchange Agent, the Information Agent or any
other person is making any recommendation as to whether or not you
should tender your Old Notes for exchange in the Exchange Offers,
or provide Old Notes Consents in the Consent Solicitations. You
must make your own decision whether to tender your Old Notes in the
Exchange Offers and provide Old Notes Consents in the Consent
Solicitations, and, if so, the amount of your Old Notes to
tender.
Global Bondholder Services Corporation is
serving as the exchange agent and information agent for the
Exchange Offers. Any question regarding the Exchange Offers or the
Consent Solicitations or the procedures for tendering Old Notes and
requests for copies of the Offering Memorandum may be directed to
Global Bondholder Services by phone at 866-470-3800 (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
Old Notes, the New 2025 Notes or any other securities of the Issuer
or the Company, including any securities to be offered to the
holders of the unsecured term loan, nor shall there be any such
offer, solicitation or sale in any state or other jurisdiction in
which such an offer, solicitation or sale would be unlawful. This
press release also is not a solicitation of consents to the
Proposed Amendments to the Old Notes Indenture. The Exchange Offers
are being made solely on the terms and subject to the conditions
set forth in the Offering Memorandum and the information in this
press release is qualified by reference to such Offering
Memorandum.
The New 2025 Notes have not been and will not be
registered under the U.S. Securities Act of 1933, as amended (the
“Securities Act”), or with any securities regulatory authority of
any State or other jurisdiction. The Exchange Offers will only be
made, and the New 2025 Notes are only being offered and will only
be issued, to holders of Old Notes either (a) in the United States,
that are “qualified institutional buyers,” as that term is defined
in Rule 144A under the Securities Act, in a private transaction in
reliance upon an exemption from the registration requirements of
the Securities Act or (b) (i) outside the United States, that are
persons other than “U.S. persons,” as that term is defined in Rule
902 under the Securities Act, in offshore transactions in reliance
upon Regulation S under the Securities Act, (ii) if located or
resident in any Member State of the European Economic Area which
has implemented Directive 2003/71/EC, as amended (the “Prospectus
Directive”), who are “Qualified Investors” as defined under the
Prospectus Directive and (iii) if located or resident in Canada, is
an “accredited investor” as defined in National Instrument 45- 106
– Prospectus Exemptions (“NI 45-106”) or section 73.3(1) of the
Securities Act (Ontario) and is a “permitted client” as defined in
National Instrument 31-103 - Registration Requirements, Exemptions
and Ongoing Registrant Obligations (“NI 31-103”).
Documents relating to the Exchange Offers will
be distributed only to holders of Old 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.
Additionally, holders of Old Notes that are resident in Canada are
required to complete, sign and submit a Canadian eligibility
form. To access these documents, click on the following link:
http://gbsc-usa.com/eligibility/khov.
ABOUT HOVNANIAN ENTERPRISES,
INC.:
Hovnanian Enterprises, Inc., founded in 1959 by
Kevork S. Hovnanian, is headquartered in Matawan, New Jersey and,
through its subsidiaries, 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 name K. Hovnanian® Homes. Additionally, the Company’s
subsidiaries, as developers of K. Hovnanian’s® Four Seasons
communities, make the Company 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” within the meaning of the “Safe
Harbor” provisions of the Private Securities Litigation Reform Act
of 1995. 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
significant homebuilding downturn; (2) adverse weather and other
environmental conditions and natural disasters; (3) high leverage
and restrictions on the Company’s operations and activities imposed
by the agreements governing the Company’s outstanding indebtedness;
(4) availability and terms of financing to the Company; (5) the
Company’s sources of liquidity; (6) changes in credit ratings; (7)
the seasonality of the Company’s business; (8) the availability and
cost of suitable land and improved lots and sufficient liquidity to
invest in such land and lots; (9) shortages in, and price
fluctuations of, raw materials and labor; (10) reliance on, and the
performance of, subcontractors; (11) 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; (12) fluctuations in
interest rates and the availability of mortgage financing; (13)
increases in cancellations of agreements of sale; (14) changes in
tax laws affecting the after-tax costs of owning a home; (15)
operations through unconsolidated joint ventures with third
parties; (16) government regulation, including regulations
concerning development of land, the home building, sales and
customer financing processes, tax laws and the environment; (17)
legal claims brought against us and not resolved in our favor, such
as product liability litigation, warranty claims and claims made by
mortgage investors; (18) levels of competition; (19) successful
identification and integration of acquisitions; (20) significant
influence of the Company’s controlling stockholders; (21)
availability of net operating loss carryforwards; (22) utility
shortages and outages or rate fluctuations; (23) changes in trade
policies, including the imposition of tariffs and duties on
homebuilding materials and products, and related trade disputes
with and retaliatory measures taken by other countries; (24)
geopolitical risks, terrorist acts and other acts of war; (25) loss
of key management personnel or failure to attract qualified
personnel; (26) information technology failures and data security
breaches; (27) negative publicity; and (28) 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, 2018 and subsequent filings with the Securities and
Exchange Commission. 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.
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Contact: |
J. Larry Sorsby |
Jeffrey T. O’Keefe |
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Executive Vice President & CFO |
Vice President, Investor Relations |
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732-747-7800 |
732-747-7800 |
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