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Jonathan Blumberg
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Jonathan Blumberg is a derivative trader who likes to look for DEEP value situations in his spare time.
  • HOV - What ar eyou thinking? 0 comments
    Nov 11, 2009 10:30 PM | about stocks: HOV, HOV

    Hovnanian has an opportunity right now that is looking them right in the face.  They have been actively buying back debt in the open market thru tender offers - I looked at a 7% (or so) bond of there's today that looked like it was trading around 70. 
    As they buy in some of their debt at prices ranging between 70-90% of par they continue to ignore their preferred shares that are trading at 23% of par.  HOVNP a $25 par preferred is trading at $5.71 - this preferred is forgotten because right now it is not paying its dividend.  This is where the company has an opportunity, offer the preferred holders a swap for common - similar to what Citibank and other banks have done.  Suppose they offered 2.5 shares of common for preferred, they get to retire the preferred for about 40% of par and they clean up another piece of their cap structure.  As a holder of the preferred stock I would love an offer like that - the company might say its dilutive...but what are they diluting - there are no earnings right now - and as soon as earnings start coming they will have to start paying the pref dividend again - so cash out the door.  If I was the CFO or a board member I would offer the preferred holders a swap - and put this issue to bed.

    Long HOVNP

    Stocks: HOV, HOV
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