Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, had its biggest decline in New York trading since January after disclosing plans to sell 25 million shares to buy debt.
The company will use proceeds from the sale to buy some of its senior unsecured notes in a private transaction, the Red Bank, New Jersey-based company said in a statement yesterday after the close of regular U.S. trading. Hovnanian also may use money from the offering for general corporate purposes, including debt payment or refinancing.
Hovnanian, whose debt burden and lack of profitability have helped send its shares down 36 percent over the past year, reported a narrower first-quarter loss on March 7 as sales rose and the company reduced writedowns. The builder had $1.64 billion of debt as of Jan. 31, according to data compiled by Bloomberg.
“While this transaction represents a step in the right direction, it is just that -- a step -- and does not alleviate the liquidity constraints the company faces,” David Goldberg, Susan Maklari and Michael Clerico, analysts at UBS AG, wrote in a note to investors today.
Hovnanian fell 8.5 percent to $2.15 as of 4:15 p.m. in New York, the most since Jan. 17, when it dropped 9.4 percent.