NEW YORK Jan 16 Standard & Poor's on Wednesday
cut Hovnanian Enterprises Inc's (HOV.N) preferred stock to
default after the home builder failed to pay a scheduled
The rating agency also placed Hovnanian's debt ratings on
review for downgrade, pending the result of negotiations
between the builder and its bank to amend its credit facility.
The company failed to pay a quarterly dividend on its $140
million series A preferred stock on Tuesday due to terms in its
bonds that restrict dividend payments when its breaks certain
ratios, in this case known as fixed-charge coverage.
Fixed charge coverage refers to a company's ability to pay
fixed financing expenses. Hovnanian was required under terms of
its debt to keep this coverage at minimum two times, which it
breached in the 12 months ending Oct. 31, S&P said.
Hovnanian was granted a temporary waiver from its bank
lenders after it violated its tangible net worth and leverage
covenants in its fourth quarter, S&P said.
The company's debt is on review for downgrade "pending the
completion of the company's negotiations with its bank group to
amend its credit facility and receive adequate covenant relief
to operate through this housing cycle," S&P said.
S&P has a corporate credit and senior unsecured debt rating
of "B-plus" on Hovnanian, four levels below investment grade.
(Reporting by Karen Brettell; Editing by Dan Grebler)