Court opens bidding for Hawaiian Telcom


POSTED: Thursday, July 02, 2009

Honolulu-based Sandwich Isles Communications still has a shot at its $400 million bid to buy Hawaiian Telcom out of bankruptcy.

U.S. Bankruptcy Court Judge Lloyd King yesterday denied a motion by Hawaiian Telcom to extend its exclusivity period by an additional three months.

King said his decision was not to be taken as criticism of Hawaiian Telcom, nor an endorsement of Sandwich Isles, but a reflection of what's in the public's best interest.

“;Because of the public interest,”; said King, “;Sandwich Isles should not be denied an opportunity to see if it can present a serious alternative to the plan that has been filed.”;

Hawaiian Telcom filed its reorganization plan on June 3, proposing the conversion of about $590 million of the company's secured debt into equity. The company's deadline to file its plan was June 30. With the judge's denial yesterday, It still has until Aug. 31 to solicit support for the plan.

Whether Sandwich Isles can submit a plan before Sept. 1 has yet to be resolved by the two sides.

But now other parties — and not just Sandwich Isles — also will have the opportunity to come forward with an alternative reorganization plan.

“;We're confident the plan we filed on June 3, which is supported by the secured lenders, best serves the public's interest and the company's long-term viability and is confirmable,”; said Hawaiian Telcom spokesman Brian Tanner.

The plan, however, also must be approved by the state Public Utilities Commission, a process which could take an additional six to nine months.

At the heart of the dispute between Sandwich Isles and Hawaiian Telcom is access to information about the company, including its advisory board meetings and its data room.

Sandwich Isles, which provides telecommunications services to the state Department of Hawaiian Home Lands through low-interest government loans, put forth its bid two weeks ago and opposed the extension.

Sandwich Isles attorney Gregory Bray claimed that his client could not complete its due diligence because of Hawaiian Telcom's lack of cooperation.

“;We've been shut out,”; Bray told the judge. “;There's been no transparency here.”;

Hawaiian Telcom attorney Chistopher Marcus said the company's advisory board already had determined that Sandwich Isles was not a qualified buyer. The data room contains proprietary and confidential customer information, he said, and therefore isn't open to anyone, including unqualified bidders.

Hawaiian Telcom called the Sandwich Isles bid “;a lowball offer.”; The bid does not have the support of the unsecured creditors' committee, nor the International Brotherhood of Electrical Workers, Local 1357.

King said Hawaiian Telcom's criticisms of Sandwich Isles are a “;self-fulfilling prophecy”; when the latter is shut out from obtaining information.

Hawaiian Telcom has more than $1.1 billion in claims, with more than half of it owed to lenders. The lenders and creditors' committee, meanwhile, have a loan dispute that has yet to be resolved.

Bray called Hawaiian Telcom a “;failed acquisition,”; with distant management, no business plan and a crumbling infrastructure. The curricula vitae of Sandwich Isles' senior officers, meanwhile, show they are qualified to run the company, he said.

“;We're pleased that the court terminated exclusivity,”; said Bray after the judge's ruling. “;It's certainly our desire to file a competing plan.”;