Hawaiian Telcom postpones $26M interest payment

HONOLULU - Hawaiian Telcom Communications Inc. has postponed a $26 million interest payment, prompting Standard and Poor's to cut its credit rating to "D" — the agency's lowest rating.

The state's largest telephone company said Monday that it "chose not to make the payments" due Sunday. It instead decided to conserve cash and use a 30-day grace period to give it time to restructure its debt.

It is considering re-evaluating assets, raising capital and reducing debt.

The company said the move will "not impact normal business operations."

Hawaii 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.

Gov. Linda Lingle said her administration, the state Public Utilities Commission and the state Consumer Advocate were closely monitoring the situation.

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.

"The nonpayment (of interest) is a function of the borrower being under financial stress," Standard & Poor's credit analyst Susan Madison said.

Standard & Poor's said the nonpayment was tantamount to a default.

"We consider a default to have occurred when a payment related to an obligation is not made, even if a grace period exists ... unless we are confident that the payment will be made in full during the grace period," Madison said.

Steven Golden, vice president of external affairs for Hawaiian Telcom, said the company is in negotiations with its bondholder but would not characterize the status of those talks.

"The company is actively involved in discussions with its creditors, including holders of these notes, with plans to reach an agreement that ultimately supports the long-term success of the company," Hawaiian Telcom said in a news release.

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