Hovnanian (HOV) Using Proceeds From Share Issuance to Repurchase Notes

Hovnanian had recently announced that they would be issuing and selling up to 28,750,000 shares - which is almost a 30 percent increase in shares outstanding. Today they announced that the

"net proceeds from the issuance of the Shares, along with cash on hand, will be used to fund the purchase of approximately $15.3 million principal amount of 6 1/4% Senior Notes due 2016, approximately $22.8 million principal amount of 7 1/2% Senior Notes due 2016 and approximately $37.4 million principal amount of 8 5/8% Senior Notes due 2017 in a private transaction."

The 6.25s trade at 72, the 7.5s trade at about 60, and the 8.625s trade at 60 as well. There's actually only about $175 million of the 8.625s remaining, so they are buying back more than 20 percent of that issue. Another slow motion restructuring. The stock appears to be roughly half owned by retail; and most of the institutional holders are index funds.