Cerberus gets a slice of Hawaiian Telcom

Bankrupt Hawaiian Telcom has found a white knight in Cerberus Capital Management. The New York-based private equity company has agreed to help pay down the company's debt with the promise that they will get a piece of the telco when it exits Chapter 11 protection.

Although the filing made with the U.S. Bankruptcy Court in Honolulu did not specify how big a piece Cerberus will get in Hawaiian Telcom, the equity firm did confirm it has taken on $7.7 million of the telco's bank debt from JPMorgan Chase & Co. When Hawaiian Telcom filed for Chapter 11 protection last year, the company had around $1 billion in debt. The 524,000-line Hawaiian Telcom is owned by private equity company The Carlyle Group, which purchased the former Verizon Hawaii in 2005 for $1.6 billion and then took over network operations in April 2006.

Carlyle is just one of two companies that have purchased former Verizon lines and have failed to run them effectively. Barely a year after Carlyle filed for bankruptcy protection [1], FairPoint Communications, which also faced mounting costs in trying to fix problems with the New England lines it bought off of Verizon, filed [2] for Chapter 11 protection this October. And with all of the troubles the Carlyle Group has had in running the Hawaiian ILEC, all eyes will be watching to see if Cerberus can use its transformational skills to turn Hawaiian Telcom into a profitable company.

For more:
- Pacific Business News (Honolulu) has this article [3]

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