The Wall Street Journal December 2, 2008
Carlyle's Bet on Telecom in Hawaii Ends Badly
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Hawaiian Telcom Communications Inc. filed for bankruptcy protection Monday, a black eye for buyout firm Carlyle Group and another blow to the reeling world of private- equity investing.
Carlyle bought Hawaii's largest telephone carrier from Verizon Communications Inc. in 2005 for $1.6 billion, putting up $425 million in equity and using debt to finance the rest. Carlyle stocked the board with a team of telecom experts, including William Kennard, former chairman of the Federal Communications Commission, and former Nextel Communications Inc. Chief Executive Daniel Akerson.
But the Washington, D.C.-based private-equity firm faced problems from the start. State utility regulators delayed the deal's closing. And billing and customer-service issues plagued Hawaiian Telcom as it created back-office systems from scratch. That spurred customers to drop service for wireless and cable providers.
In the third quarter, Hawaiian Telcom's revenue declined
6.7% to $112.3 million, and its loss widened to $34.7 million, the company's third consecutive quarterly loss.Separately, Hawaiian Telcom's lead law firm, Kirkland & Ellis LLP, beefed up its restructuring group over the weekend by rehiring James Sprayregen, who previously spent 16 years at the firm. In 2006, he decamped to Goldman Sachs Group Inc. to work as an investment banker.
"I feel like this next wave of corporate bankrupticies is just starting," said Mr. Sprayregen, who will co-chair the law firm's bankruptcy group.
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