Hovnanian adopts shareholder rights plan

NEW YORK (Reuters) - Hovnanian Enterprises Inc (HOV.N) has adopted a shareholder rights plan to protect its right to future tax rebates, the U.S. home builder said on Monday.

For more than a year, the company has posted substantial operating losses, which under U.S. tax rules may be used to offset future earnings and reduce federal income tax.

However, if certain shareholders increase their ownership, that could be seen as an "ownership change" under the tax code and limit its abilities to use the tax benefit, the company said.

"The rights plan is not intended for defensive or anti-takeover purposes and is in the best interests of all stockholders of Hovnanian," Chief Executive Ara Hovnanian said in a statement. "Once the tax benefits of the net operating losses and built in losses have been utilized, the board intends to terminate the rights plan."

Under the rights plan, the company will distribute one right for each Class A and Class B common share as of the close of business on August 15.

The rights plan would be triggered if any person or group acquires 4.9 percent or more of the outstanding shares of Class A common stock without the approval of the board.

Two years ago, Hovnanian shares closed at $69.54. They closed on Monday at $6.61, losing more than 90 percent of their value within that time.

(Reporting by Ilaina Jonas; Editing by Braden Reddall)