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alstry (< 20)

How SubPrime is HOV?



May 16, 2008 – Comments (1)

After hours HOV reveals the following:

Hovnanian prices $600M private notes offering
Friday May 16, 5:56 pm ET Hovnanian prices notes offering at $600 million, eliminates covenants on credit agreement

RED BANK, N.J. (AP) -- Homebuilder Hovnanian Enterprises Inc. on Friday priced its $600 million private offering of senior notes.

The offering, for 11.5 percent senior notes due May 1, 2013, is expected to close on May 27.

Hovnanian also amended its revolving credit agreement, decreasing total commitments to $300 million, increasing the amount of collateral and "substantially" eliminating maintenance covenants.

Net proceeds from the offering will be used to repay debt under existing revolving credit agreement and for general corporate purposes.


At the end of last quarter, HOVs total outstanding debt was about $2.2 billion.  Of that approximately $300 million was outstanding on the revolver.   How much was the revolver run up between the end of last quarter and today's offering to force HOV to borrow $600 million at 11 1/2%.

If HOV couldn't paydown debt in a better selling environment at lower interest rates, how in the world does it expect to service more debt at higher rates in a slower selling environment?


It apprears the key beneficiaries of this deal was the revolver lenders and the investment banks....guess what....they overlap.

1 Comments – Post Your Own

#1) On May 16, 2008 at 7:19 PM, EScroogeJr (< 20) wrote:

Exellent news. HOV escapes bankruptcy and wins another 5 years to realize the fair value of its assets currently underpriced at 4 billion dollars and a change. With this news, I now put the fair value of HOV's shares north of $20.

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