Fitch Rates Hovnanian's Perpetual Preferred Stock Issuance

Business Wire, June 29, 2005

NEW YORK -- Fitch Ratings has assigned a 'B ' rating to Hovnanian Enterprises, Inc.'s (NYSE: HOV) $100 million series A noncumulative perpetual preferred stock issuance. The offering of 4 million depository shares represent Hovnanian's series A perpetual preferred stock, with a liquidation value of $25 per depository share. Fitch also affirms HOV's existing ratings as follows:

--Senior debt 'BB ';

--Senior subordinated debt 'BB-';

--Rating Outlook Stable.

The proceeds from the perpetual preferred stock offering will be used to repay the debt outstanding under HOV's revolving credit facility.

Fitch allocated 100% equity credit to the new issuance given the perpetual term of the preferred stock combined with the noncumulative dividend feature. The preferred stock will not be convertible into HOV's common stock and will be redeemable at the company's option at the liquidation value of the shares five years after their issuance. If HOV chooses to exercise such redemption rights, its intention is to only do so with the proceeds from the issuance of equally equity-like or more-equity like securities. The preferred stock ranks junior to HOV's debt securities, but ranks senior to the common stock.

According to Fitch's calculations, proforma April 30, 2005 equity-adjusted debt-to-total capital at HOV was 45.5%.

Hovnanian Enterprises, Inc., the eighth largest homebuilder in the United States, designs, constructs and sells single-family detached homes, attached town homes and condominiums, mid-rise and high-rise condominiums, urban infill and active adult homes in planned residential developments. HOV consists of two operating groups: homebuilding and financial services. The financial services group provides mortgage loans and title services to HOV's homebuilding customers. HOV is currently offering homes for sale in 308 communities in 33 markets in 17 states, primarily marketing and building homes for the first-time buyers, first-time and second-time move-up buyers, luxury buyers, active adult buyers and empty nestors. Prices range from $46,000 to $1,350,000 with an average sales price, including options, of $280,000 in fiscal 2004. HOV reported revenues of $4.16 billion and net income of $354.76 million last year.

Fitch's rating definitions are available on the agency's public web site, 'www.fitchratings.com.' Published ratings, criteria and methodologies and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.