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Ruling protects HawTel data


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POSTED: Thursday, July 30, 2009

Hawaiian Telcom won the latest round in U.S. Bankruptcy Court yesterday by gaining Judge Lloyd King's approval of protocols it wants in place before another company can access its confidential data.

The protocols basically block Sandwich Isles Communications from accessing HawTel's “;electronic data room”; unless Sandwich Isles offers some financial information itself.

Honolulu-based Sandwich Isles in June made an unsolicited $400 million offer to buy HawTel out of bankruptcy.

In order to obtain financing, Sandwich Isles says it needs access to HawTel's data room to do its due diligence. Sandwich Isles says HawTel has been uncooperative, even though it signed a confidentiality agreement.

But HawTel says it must protect sensitive information—especially when dealing with competitors to avoid a scenario similar to the airlines. It drew up three levels of protocols approved by the judge yesterday, which Sandwich Isles says are unreasonable.

In previous years, Phoenix-based Mesa Air Group, as a potential bidder for Hawaiian and Aloha airlines, was able to access confidential information from both and then start go!—as a competitor.

Mesa had financing and had signed a confidentiality agreement, but violated it and ended up in litigation with both airlines.

Sandwich Isles seeks, among other items of information, a list of HawTel's products in order of their current dollar sales volume, a monthly billing summary for local customers on neighbor isles, a log of customer complaints, and detailed capital-expenditure and maintenance budgets for the last 10 years.

With this information, HawTel says Sandwich Isles could undercut its pricing and target and poach its customers.

HawTel's level one protocol requires a potential bidder to prove it is financially qualified. But Sandwich Isles has not provided basic financial information similar to that required by the Securities and Exchange Commission, or disclosed who its financing partners would be.

“;Further, there is no publicly available information or any history of similar transactions by Sandwich Isles,”; HawTel says in court filings.

Sandwich Isles says it always has been upfront about its intention to acquire HawTel with 100 percent financing.

The company says it has several letters of intent from well-known financial institutions, but cannot go further without more information.

Founded in 1995, Sandwich Isles provides services to the state Department of Hawaiian Home Lands and rural areas using low-interest government loans.

It is also seeking the Federal Communication Commission's approval to cover all of the neighbor isles, which HawTel currently serves.

Attorneys for both parties declined to comment outside court yesterday.

HawTel filed for Chapter 11 bankruptcy in December 2008, followed by a plan to emerge from bankruptcy in early June. The company has until September to solicit votes for the plan.