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Carlyle's Hawaiian Telecom Bet Goes Belly Up

When private equity giant Carlyle Group announced its purchase of Hawaiian Telecom for $1.65 billion, its resident telecom guru and former Federal Communications Commission Chairman Bill Kennard called it an "exciting opportunity" that was expected to add many new jobs.

Fast forward four years and the troubled telecommunications firm, saddled with about $1 billion in debt, has become the latest casualty of the credit crisis that continues to grip Wall Street and companies of all sizes on Main Street.

Hawaiian Telecom said today it filed for bankruptcy protection after it missed $26 million in interest payments last month. It had been trying to work out a debt-restructuring plan with its creditors but said in a statement that Chapter 11 was the best way to handle its debt woes.

"Our decision to restructure through a Chapter 11 filing allows the company to reduce its level of debt and reorganize its business, so we can emerge a stronger and more financially secure company better able to compete in the ever-changing communications industry," said chief executive Eric Yeaman.

Of its $1 billion in debt, about $574.6 million is in bank loans and $500 million is in bonds.

Hawaiian Telecom's bankruptcy filing is the latest of main street's wreckage from the financial crisis that has roiled airline companies and sent Detroit's major automakers over the last few weeks to plea for government assistance.

Analysts like Craig Moffet of Sanford C. Bernstein said the biggest telecom firms are fairly stable. AT&T and Verizon Communications have strong cash positions and a large subscriber base that won't give up basic telecommunications services like cellular and Internet services in the economic downturn.

The Carlyle Group bought Hawaiian Telecom from Verizon in 2004, a deal spearheaded by Kennard, who sits on the company's board and is one of president-elect Barack Obama's key technology advisers. The private equity firm invested $24 million in updating Hawaiian Telecom's back-office operations.

By Cecilia Kang  |  December 1, 2008; 6:30 PM ET  | Category:  Cecilia Kang
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Please email us to report offensive comments.

Good thing they paid my invoices ;)

Posted by: Bodiethebulldog | December 1, 2008 7:18 PM


BO has Kennard as one of his key technology advisors?

Lets hope his other picks are more savy.

Posted by: ziga | December 2, 2008 10:51 PM

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