The cash tender offer is an opportunistic transaction for Hovnanian that would allow the company to lower its absolute debt levels by between $116 million and $170 million for approximately $88.5 million of cash. Holders of its senior subordinated notes due 2010 ($28.9 million outstanding) will be entitled to receive a cash consideration of at least $955 for each $1,000 principal amount accepted for purchase. The offer also includes a Dutch Tender Offer for 40%-75% of the original principal amount of certain senior and senior subordinated notes maturing between 2012 and 2017.

The current tender offer follows the repurchase of approximately $578.3 million of debt in open market transactions so far in fiscal year 2009 for about $223.1 million. Hovnanian currently has adequate liquidity, with $779.2 million of unrestricted cash on the balance sheet as of April 30, 2009 and only $29 million of debt maturing in 2009 and 2010. The company has also generated $516 million of cash from operations for the latest twelve months ending April 30, 2009.

Fitch will continue to monitor broad housing market trends as well as company-specific activity, such as land and development spending, general inventory levels, speculative inventory activity, gross and net new-order activity, debt levels (including the potential for additional debt repurchases) and especially free cash flow trends and uses and the company's cash position.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

A service of YellowBrix, Inc.