Hawaiian Telcom Communications Inc. has deferred $26 million in bond interest payments as it attempts to restructure its balance sheet.

The state's largest telecommunications company, which lost $30.5 million in the second quarter, opted not to make payments due last Saturday as part of a plan to conserve cash.

It instead exercised a 30-day grace period while pursuing restructuring options, according to a filing with the U.S. Securities and Exchange Commission.

Hawaiian Telcom said it had built up about $80 million in cash as of last Friday.

“;There is no assurance that the company will make the interest payments during the grace period or otherwise reach an agreement with creditors on any such restructuring,”; Hawaiian Telcom said in the filing. This is the first time the company has exercised its option to postpone interest payments, indicating the seriousness of its financial troubles.

“;We're very well aware of the need to improve our operating results, so we really view this whole balance sheet restructuring as critical to that whole process,”; said Steven Golden, vice president of external affairs, adding that the company expects another loss in its third quarter earnings due out Nov. 14.

Golden said the move was in the best interest of the company, although the deferral has affected its corporate credit rating, which Standard & Poor's lowered yesterday to D from CCC+.

The Honolulu-based firm has continued to record land-line subscriber losses, which hurt second-quarter earnings. It posted $115.3 million in revenue in the quarter, down 5 percent from $121.4 million a year earlier.

Hawaiian Telcom has lost more than $201 million since Carlyle Group of Washington, D.C., acquired Verizon Communication Inc.'s Hawaii assets for $1.6 billion in 2005. The company's revenue over the last year was affected by an estimated $100,000 when it inadvertently stopped charging 2,100 customers a $6.50 subscriber line fee late last year.

While Hawaiian Telcom is in discussions with creditors, including bondholders of these notes, normal business operations for customers, employees and vendors will not be affected, the company said in a statement.

Hawaiian Telcom's decision to forego a debt payment is just one of the steps the company has been taking to restructure its finances and operations - moves both the state Public Utilities Commission and state Consumer Advocate are aware of, according to Gov. Linda Lingle.

“;My administration will remain in regular contact with Hawaiian Telcom to keep abreast of their future efforts,”; Lingle said in a statement.

The company is considering re-evaluating assets, raising capital and debt reduction with its creditors.

Hawaiian Telcom is among a number of firms feeling the pressure of changing industry dynamics, the highly competitive telecommunications business and an overall slump in the economy.

The company's payment deferral includes senior floating rate notes and 9.75 percent senior fixed rate notes both due in 2013; and 12.5 percent senior subordinated notes due in 2015. The company will be in default if it fails to make interest payments within the 30-day grace period, which could result in all bond notes becoming immediately due.