HOVNANIAN ENTERPRISES, INC. (OTCMKTS:HOVVB) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01. Entry into a Material Definitive Agreement.

On May 30, 2018, K. Hovnanian Enterprises, Inc. (“K. Hovnanian”), Hovnanian Enterprises, Inc. (the “Company” or “Hovnanian”), as guarantor, the other guarantors party thereto and Wilmington Trust, National Association, as trustee (the “Trustee”), executed the Second Supplemental Indenture, dated as of May 30, 2018 (the “Supplemental Indenture”), to the Indenture, dated as of February 1, 2018 (as previously supplemented, amended or otherwise modified, the “Indenture”), governing K. Hovnanian’s 13.5% Senior Notes due 2026 (the “2026 Notes”) and 5.0% Senior Notes due 2040 (the “2040 Notes” and, together with the 2026 Notes, the “Notes”), among K. Hovnanian, the Company, as guarantor, the other guarantors party thereto and the Trustee, providing for amendments to the Indenture consented to by the holders of at least a majority in aggregate principal amount of the outstanding Notes of each series.

The Supplemental Indenture eliminates the covenant restricting certain actions with respect to the $26.0 million aggregate principal amount of K. Hovnanian’s 8.000% Senior Notes due 2019 (the “8.0% Notes”) held by K. Hovnanian at Sunrise Trail III, LLC (the “Sunrise Trail 8.0% Notes”), a wholly-owned subsidiary of the Company, which covenant had included requirements that (A) K. Hovnanian and the guarantors of the Notes would not, (i) prior to June 6, 2018, redeem, cancel or otherwise retire, purchase or acquire any Sunrise Trail 8.0% Notes or (ii) make any interest payments on the Sunrise Trail 8.0% Notes prior to their stated maturity, and (B) K. Hovnanian and the guarantors of the Notes would not, and would not permit any of their subsidiaries to (i) sell, transfer, convey, lease or otherwise dispose of any Sunrise Trail 8.0% Notes other than to any subsidiary of the Company that is not K. Hovnanian or a guarantor of the Notes or (ii) amend, supplement or otherwise modify the Sunrise Trail 8.0% Notes or the indenture under which they were issued with respect to the Sunrise Trail 8.0% Notes, subject to certain exceptions. In addition, the Supplemental Indenture eliminates events of default related to the eliminated covenant.

On May 30, 2018, K. Hovnanian paid the overdue interest on the Sunrise Trail 8.0% Notes that was originally due on May 1, 2018. As a result of such payment, the “Default” under the indenture governing the 8.0% Notes has been cured.

The foregoing description of the Supplemental Indenture is not complete and is qualified in its entirety by reference to the Supplemental Indenture, a copy of which is attached as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 3.03. Material Modification to Rights of Security Holders.

The information set forth above under Item 1.01 with respect to the Supplemental Indenture is hereby incorporated by reference into this Item 3.03.

Item 7.01. Regulation FD Disclosure.

The information set forth above under Item 1.01 with respect to the payment of overdue interest on the Sunrise Trail 8.0% Notes and below under Item 8.01 with respect to the dismissal of the lawsuit described therein is hereby incorporated by reference into this Item 7.01.

While the developments discussed in this Current Report on Form 8-K will mean that there is no failure-to-pay credit event with respect to the 8.0% Notes that could trigger a payment in the credit default swap market, Hovnanian has never been a party to any credit default swaps and has no financial interest in the outcomes in that market. Hovnanian is pleased that the litigation is resolved and remains focused on building beautiful, high-quality homes and growing the business.

Item 8.01. Other Events.

Stipulation of Dismissal

On January 11, 2018, Solus Alternative Asset Management LP (“Solus”) filed a complaint in the United States District Court for the Southern District of New York against GSO Capital Partners L.P. (“GSO”), Hovnanian, K. Hovnanian, K. Hovnanian at Sunrise Trail III, LLC (“Sunrise Trail”), Hovnanian’s wholly owned subsidiary, Ara K. Hovnanian and J. Larry Sorsby. The complaint related to K. Hovnanian’s offer to exchange up to $185.0 million aggregate principal amount the 8.0% Notes for a combination of (i) cash, (ii) K. Hovnanian’s2026 Notes and (iii) K. Hovnanian’s 2040 Notesand related transactions that were previously disclosed in Hovnanian’s Current Report on Form 8-K filed on December 28, 2017.

On May 30, 2018, the parties signed a stipulation of dismissal with prejudice that ends the case as to all parties. As part of the case resolution, the only obligation on the Hovnanian-related parties is to have K. Hovnanian pay to Sunrise Trail all amounts due to it as aresult of the missed interest payment on the Sunrise Trail 8.0% Notes that was originally due on May 1, 2018. The end of the litigation does not impact the benefits to Hovnanian of the financing transactions with GSO announced on December 28, 2017, the terms of which are unchanged.

Redemption of 8.0% Notes

On May 29, 2018, K. Hovnanian completed the redemption of $65,735,000 aggregate principal amount of its 8.0% Notes (the “Redemption”), which represents all of the outstanding 8.0% Notes, excluding the Sunrise Trail 8.0% Notes. The Redemption was funded with the proceeds from K. Hovnanian’s delayed draw term loan borrowings in the amount of approximately $70.0 million under that certain Credit Agreement, dated as of January 29, 2018, among K. Hovnanian, the Company, the other guarantors party thereto, the lenders party thereto and Wilmington Trust, National Association, as administrative agent.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are attached to this Current Report on Form 8-K:

HOVNANIAN ENTERPRISES INC Exhibit
EX-4.1 2 ex_115500.htm EXHIBIT 4.1 ex_115500.htm Exhibit 4.1   SECOND SUPPLEMENTAL INDENTURE   dated as of May 30,…
To view the full exhibit click here

About HOVNANIAN ENTERPRISES, INC. (OTCMKTS:HOVVB)

Hovnanian Enterprises, Inc. is a builder of residential homes. The Company designs, constructs, markets and sells single-family detached homes, attached townhomes and condominiums, urban infill and active lifestyle homes in planned residential developments. The Company has two distinct operations: homebuilding and financial services. Its homebuilding operations consist of six segments: Northeast: New Jersey and Pennsylvania; Mid-Atlantic: Delaware, Maryland, Virginia, Washington, District of Columbia, and West Virginia; Midwest: Illinois and Ohio; Southeast: Florida, Georgia and South Carolina; Southwest: Arizona and Texas, and West: California. Its financial services operations provide mortgage loans and title services to the customers of its homebuilding operations. The Company markets and builds homes for first-time buyers, first-time and second-time move-up buyers, luxury buyers, active lifestyle buyers and empty nesters.