Davis Polk advised Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC as the initial purchasers in a Rule 144A/Regulation S offering by K. Hovnanian Enterprises, Inc., a wholly owned subsidiary of Hovnanian Enterprises, Inc., of $577 million aggregate principal amount of 7.25% senior secured first-lien notes due 2020 and $220 million aggregate principal amount of 9.125% senior secured second-lien notes due 2020. The notes are guaranteed on a senior secured basis by Hovnanian and certain of its subsidiaries. Concurrently, Davis Polk advised J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC as joint book-running managers in connection with the SEC-registered offering of $100 million aggregate stated amount of 6% exchangeable note units by K. Hovnanian (including $10 million aggregate stated amount from the full exercise of the underwriters’ over-allotment option). Each unit consists of a zero coupon exchangeable note and an amortizing note, each of which is issued by K. Hovnanian and is guaranteed on a senior unsecured basis by Hovnanian and certain of its subsidiaries.
A portion of the proceeds of the offerings are being used to fund a tender offer by K. Hovnanian for any and all of its 10.625% senior secured notes due 2016 and a solicitation of consents to certain amendments to the related indenture. Davis Polk advised Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC as dealer managers and solicitation agents in connection with the tender offer and consent solicitation. The remaining proceeds of the offerings will be used to redeem the 10.625% senior secured notes that were not purchased in the tender offer.
Hovnanian is one of the nation’s largest builders of residential homes.
The Davis Polk capital markets team included partner Michael Kaplan, counsel Jeff Ramsay and associates Scott Lunin and Xuelin (Steve) Wang. The equity derivatives team included partner John M. Brandow and associates Jonathan Armstrong and Katharine O’Banion. Partner Jason Kyrwood and associates John Perry and Christopher R. Utecht provided credit advice. Counsel Susan D. Kennedy and associates Lucie E. Shin and Steve Sorkin provided real estate advice. The tax team included partner Lucy W. Farr and associate Adam B. Perry. Counsel Loyti Cheng and associate Catharine Thorpe provided environmental advice. Kristyn M. Dunleavy was the legal assistant on the transaction. All members of the Davis Polk team are based in the New York office.
