Hovnanian Enterprises (NYSE:HOV) said Monday it intended to sell up to $775 million in 2016 first-lien senior secured notes in a private placement to help fund the previously announced buyback of $629 million in existing senior secured notes and a portion of its senior unsecured notes. The company on Monday cut the maximum amount of the latter notes it would purchase from the previously announced $130 million to $100 million.
After market close Monday, the company priced the notes at $785 million and 10.625% . The lead bookrunners are Citi and Credit Suisse. The notes will carry a maturity date of Oct. 15, 2016.
The company also plans to terminate its revolving credit facility, which carried no balance as of the close of the fiscal third quarter on July 31.It said it would use any excess proceeds from the offering for "additional debt repurchases from time to time and/or for general corporate purposes."
The new notes will be secured by "substantially all the assets" of the company, Hovnanian said.
Separately, the company announced Monday that $877.2 million of the notes in the buyback offer had been tendered by the deadline of close of business in New York on Friday. Among the notes tendered were $589.2 million, or 98.2%, of $600 million total in 11 1/2% senior secured notes due 2013; and $17.6 million, or 60.1%, of a total $29.3 million in 18% senior secured notes due 2017. Approximately $270 million of the unsecured notes were tendered and will be redeemed on a priority basis starting with 8% notes due 2012 and ending with 6 1/4% notes due 2016. The company previously said it would buy back all the 2013 and 2017 secured notes and, under the new limit announced Monday, up to $100 million of the unsecured notes.
Hovnanian shares traded up 8.7% at $3.72 on heavy volume early in the session Monday, settled back to $3.59, up 2.5%, by mid-afternoon, then came back to close up 7.1% at $3.75 on normal volume.