Honolulu-based Sandwich Isles Communications is offering $400 million to buy Hawaiian Telcom out of bankruptcy.

Sandwich Isles, a creditor, said in a court filing Friday that it would offer $250 million in cash plus $150 million in a debtor-financed note to buy out Hawaiian Telcom's assets.

The deal would have to be approved by U.S. Bankruptcy Judge Lloyd King, the state Public Utilities Commission and the Federal Communications Commission.

Sandwich Isles, a subsidiary of Waimana Enterprises Inc., was founded in 1995 to provide broadband services to the state Department of Hawaiian Home Lands through low-interest loans from the government.

Since 1998, the U.S. Department of Agriculture has approved three loans worth $408 million for Sandwich Isles, which is currently working on an undersea fiber-optic cable system linking DHHL residents on all six isles.

In its bid, Sandwich Isles also offered to keep 100 percent of Hawaiian Telcom's staff at current wages, except for the senior management.

But Hawaiian Telcom is not interested, and says it is standing firmly behind the proposed reorganization plan it filed in June.

The plan, which proposes to reduce the company's debt to $300 million from $1.1 billion, was approved by the special committee of its board of directors, led by former First Hawaiian Bank Chief Executive Walter Dods.

The steering committee for holders of secured claims also supports the plan.

At the same time, the company filed a motion to extend the time in which it had to file its Chapter 11 plan — called an “;exclusive period”; — until Sept. 30.

But Sandwich Isles objected to this motion, saying that after more than six months, Hawaiian Telcom still has no more viable restructuring plan than it did a year ago.

As of April 30, Sandwich Isles also said the company's consolidated net losses amounted to more than $38 million. The Sandwich Isles proposal “;represents a far superior restructuring alternative to the 'stand-alone' plan by Hawaiian Telcom,”; it said.

President Albert S.N. Hee said in his court declaration that Sandwich Isles presented its proposal to Hawaiian Telcom earlier this year, but the latter declined to engage in any meaningful dialogue.

Though Hawaiian Telcom claims it has contacted at least 35 potential buyers, it hasn't spoken to Sandwich Isles, “;a logical strategic acquirer.”;

Hee said Sandwich Isles — which has a proven financial model — has encountered increasing problems in services provided by Hawaiian Telcom that were likely caused by “;aging, a cutback in maintenance and deferral of investment.”; The declining reliability is a growing concern, he said.

Hawaiian Telcom says it intends to respond to the Sandwich Isles objection “;in the appropriate forum.”;

A court hearing on the motion is scheduled for July 1.

The Carlyle Group of Washington D.C., acquired the assets of what is now Hawaiian Telcom in 2005, and filed for Chapter 11 bankruptcy on Dec. 1, 2008.