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Hovnanian, the big New Jersey-based homebuilder, got a big no thanks from its bond holders this week. The company had tried to reduce its massive $1.6 billion debt load by offering bondholders new securties paying 18% interest. The catch was they had to accept just 60 cents on the dollar for their outstanding notes. Just $71 million worth of bonds were tendered.
The move was an attempt to preserve some assets for stockholders, including the 18% of the shares owned by management and the Hovanian family, says the debt watchers at the research firm Gimmie Credit.
“It’s going to be long and dangerous housing recession,” Gimmie Credit concluded. “If Hovnanian fails, at least the normal pecking order of claims to its assets will remain in tact for now.”
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.