Item 1.01. Entry into a Material Definitive Agreement.
On March 25, 2020, Hovnanian Enterprises, Inc. (the "Company") and K. Hovnanian
Enterprises, Inc. ("K. Hovnanian" or the "Issuer"), a wholly-owned subsidiary of
the Company, completed a private exchange (the "Exchange") of $59,128,000
aggregate principal amount of the Issuer's 10.000% Senior Secured Notes due 2022
(the "10.000% Notes") held by certain participating bondholders (the "Exchanging
Holders") for $59,128,000 aggregate principal amount of the Issuer's 11.25%
Senior Secured 1.5 Lien Notes due 2026 (the "Additional Notes") pursuant to an
Exchange Agreement, dated March 25, 2020 (the "Exchange Agreement"), among the
Issuer, the Company, the subsidiary guarantors party thereto (together with the
Company, the "Guarantors"), the Exchanging Holders and certain holders of the
Initial Notes (as defined below) (the "Consenting Holders"). In connection
therewith, the Consenting Holders provided their consents (the "Consents") under
the Indenture (as defined below) to permit the issuance of the Additional Notes.
After giving effect to the Exchange, there was approximately $136.7 million of
10.000% Notes outstanding.
The Additional Notes were issued as additional notes of the same series as the
$103,141,000 aggregate principal amount of the Issuer's 11.25% Senior Secured
1.5 Lien Notes due 2026 issued on October 31, 2019 (the "Initial Notes" and,
together with the Additional Notes, the "Notes"). In connection with the
issuance of the Additional Notes in the Exchange, the Issuer, the Guarantors and
Wilmington Trust, National Association, as trustee (the "Trustee") and
collateral agent (the "Collateral Agent"), entered into the Fourth Supplemental
Indenture, dated as of March 25, 2020 (the "Supplemental Indenture"), to the
Indenture, dated as of October 31, 2019 (as amended and supplemented prior to
the Supplemental Indenture, the "Indenture"), among the Issuer, the Guarantors,
the Trustee and the Collateral Agent. The Supplemental Indenture also amends the
Indenture in accordance with the Consents to permit the Issuer and Guarantors to
secure up to $162,269,000 of 1.5 Lien Obligations (as defined in the Indenture).
As of March 25, 2020, after giving effect to the issuance of the Additional
Notes, $162,269,000 aggregate principal amount of 1.5 Lien Obligations, which
consist of the Notes, were outstanding.
The Notes and the guarantees thereof will be secured by the same assets that
secure K. Hovnanian's other senior secured credit facilities and senior secured
notes. The Notes bear interest at 11.25% per annum, payable semi-annually on
February 15 and August 15 of each year to holders of record at the close of
business on February 1 or August 1, as the case may be, immediately preceding
each such interest payment date. The date from which interest will accrue on the
Additional Notes is February 15, 2020, and the first interest payment date for
the Additional Notes will be August 15, 2020. The Notes mature on February 15,
The Indenture contains restrictive covenants that limit, among other things, and
in each case, subject to certain exceptions, the ability of the Company and
certain of its subsidiaries, including K. Hovnanian, to incur additional
indebtedness, pay dividends and make distributions on common and preferred
stock, repay certain indebtedness prior to its respective stated maturity,
repurchase common and preferred stock, make other restricted payments (including
investments), sell certain assets (including in certain land banking
transactions), incur liens, consolidate, merge, sell or otherwise dispose of all
or substantially all of their assets and enter into certain transactions with
affiliates. The Indenture also contains customary events of default which would
permit the holders of the Notes to declare the Notes to be immediately due and
payable if not cured within applicable grace periods, including the failure to
make timely payments on the Notes or other material indebtedness, the failure to
satisfy covenants, the failure of the documents granting security for the Notes
to be in full force and effect, the failure of the liens on any material portion
of the collateral securing the Notes to be valid and perfected and specified
events of bankruptcy and insolvency (which specified events would result in
immediate acceleration of the Notes without any further action by the holders).
A copy of the Supplemental Indenture, including the form of the Additional
Notes, is attached as Exhibit 4.1 to this Current Report on Form 8-K and is
incorporated by reference herein.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off Balance Sheet Arrangement of a Registrant.
The information set forth above under Item 1.01 is hereby incorporated by
reference into this Item 2.03.
Item 9.01. Financial Statements and Exhibits.
4.1 Fourth Supplemental Indenture, dated as of March 25, 2020, relating to the
additional 11.25% Senior Secured 1.5 Lien Notes due 2026, among K. Hovnanian
Enterprises, Inc., Hovnanian Enterprises, Inc., the subsidiary guarantors
named therein and Wilmington Trust, National Association, as Trustee and
Collateral Agent, including the form of the additional 11.25% Senior Secured
1.5 Lien Notes due 2026.
© Edgar Online, source Glimpses