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S&P Eying Possible Ratings Upgrade For Hovnanian

NEW YORK (AP) â¿¿ Standard & Poor's Ratings Services said Wednesday that it has placed its debt ratings for Hovnanian Enterprises Inc. under review for a possible upgrade, citing the homebuilder's bid to raise $887 million in new debt as part of a refinancing effort.

The ratings agency set its ratings on the builder, including its non-investment grade, "CCC-" corporate credit rating, under review. That means S&P expects it will raise the rating to "CCC+" when Hovnanian completes its proposed refinancing.

Hovnanian has announced plans to raise $797 million of new first-lien and second-lien secured notes due in 2020. The builder also plans to sell $90 million of convertible notes due in 2017.

The company wants to refinance $797 million in 10.625 percent first-lien senior secured notes due in 2016.

If the proposed transaction goes through, it should reduce the builder's interest burden by $15 million to $20 million, said S&P credit analyst George Skoufis.

"The refinancing will lengthen the company's debt tenor by addressing the bulk of its 2016 debt maturities and reducing significant refinancing risk from $1 billion to $218 million," Skoufis said.

The ratings agency also noted that Hovnanian's operating performance has improved, helping to narrow the builder's losses.

After a dismal 2011, homebuilders have seen their fortunes begin to turn around this year as the housing recovery has steadily gained momentum.

Sales of both new and previously occupied homes are running ahead of last year. Home prices are increasing more consistently, in part because the supply of homes has shrunk and foreclosures have eased. And mortgage rates remain near record lows, beckoning potential buyers with good credit.

The housing market isn't expected to recover fully until job growth improves and the unemployment rate, now at 8.1 percent, declines further. But the gradual increase in homebuyer demand has helped builders like Hovnanian.

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