PUC snubs Hawaiian Telcom
A request by Hawaiian Telcom Communications Inc.
to increase its existing borrowing power by $60 million was denied by state regulators yesterday.
The state Public Utilities Commission, which oversees the troubled telecommunications company, denied a request filed Feb. 27 seeking approval to expand increasing the senior secured revolving credit facility from $90 million to $150 million. The company's right to increase its borrowing capacity under the loan expires June 1.
The state Division of Consumer Advocacy said earlier this month that it is "gravely troubled" by the impact any increase could have on the company's financial health.
State officials said they believe Hawaiian Telcom intends to draw down the requested additional funds because it already borrowed the remaining amount under the loan in March, increasing the total amount drawn to $89.8 million, with a $200,000 letter of credit "in response to uncertain conditions in financial markets."
Hawaiian Telcom's capital structure ratio "has not been, and is currently not in compliance with the commission's targeted capital structure ratio, and projected by the applicants themselves to get worse should they be allowed to incur additional debt," the Consumer Advocate said in its response. The PUC's targeted capital structure consists of 65 percent debt and 35 percent equity.
The Consumer Advocate urged that Hawaiian Telcom improve its financial stability and performance before being allowed to take on more debt.
Hawaiian Telcom spokes-woman Ann Nishida said it sought the approval only "to preserve the additional borrowing ability, at attractive lending terms, should we have a need in the future to draw from the revolver. Yesterday's ruling does not impact Hawaiian Telcom's existing financial liquidity."
As of March 31, the company had $93 million in cash and cash equivalents, compared to $8.8 million at the end of the fourth quarter and $4.9 million a year ago. Capital expenditures for the first quarter were $22.8 million.
Hawaiian Telcom posted a first-quarter loss of $40.1 million, down from net income of $15.5 million a year earlier. Revenue was $112.4 million, versus $125.5 million a year earlier.