Hovnanian Plans $775 Note Sale to Pay For Tender

First, let me just commend Hovnanian for still being in business. The beleaguered home builder is number one at the top of many investors' lists in the homebuilder death pool. The problem? The company took on too much debt to go on a land-buying spree during the boom and is struggling to pay off that debt while the value of its inventory has declined along with its revenues and profits. To solve the problem, the homebuilder came up with a brilliant plan. Hovnanian will buy back its debt that is trading at a discount, allowing it to book a profit. Of course, it doesn't really have the money, which is kind of the problem to begin with. But, no worries. They'll just issue some debt. Debt investors have proven time and time again that they are total suckers, so the plan should work well. Issue debt, buyback debt, book profit, stay in business a few more years. It's called kicking the can down the road.