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S&P affirms Hovnanian Enterprises corporate credit rating

S&P Global Ratings raised its corporate credit rating on Hovnanian Enterprises Inc. to CCC+ from SD.

The rating outlook is stable.

At the same time, S&P assigned its CCC- issue-level ratings to the newly exchanged $90.6 million of 13.5% unsecured notes due 2026 and the $90.1 million of 5% unsecured notes due 2040. The rating agency also assigned its CCC- issue-level rating to K. Hovnanian Enterprises Inc.'s newly issued $212.5 million senior unsecured term loan facility due 2027 and affirmed the B issue-level ratings on the unit's $75 million secured term loan due 2019.

S&P also affirmed its CCC+ issue-level ratings on the homebuilder's $440 million of senior secured notes due 2022 and $400 million of senior secured notes due 2024, its CCC issue-level ratings on the company's $75 million of 9.5% first-lien notes due 2020 and both the 2% and 5% senior secured notes due 2021, and the D issue-level rating on the company's 8% senior notes due 2019.

The action comes after the homebuilder completed a partial debt exchange, which improved its liquidity by extending the company's debt maturities.

However, S&P cautioned that Hovnanian's leverage continues to be very high, requiring increased profitability in the next two years before its next maturities in 2020.

The stable rating outlook mirrors S&P's expectation for continued recovery in the U.S. housing market. S&P also projects that Hovnanian will maintain its EBITDA at between $155 million and $205 million, with adjusted debt leverage above 8x, over the next 24 months, while keeping its EBITDA interest coverage above 1x as the homebuilder sustains a sufficient liquidity profile.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.