Monday, December 1, 2008

Carlyle Group's Hawaiian Telecom Goes Chapter 11

Saddled with over $1 billion in debt, Hawaiian Telecom declared Chapter 11 bankruptcy. The Carlyle Group purchased the company in 2005 for $1.6 billion. It suspended interest payments in November as it negotiated with debt holders. Forbes reported:

"Our decision to restructure through a Chapter 11 filing allows the company to reduce its level of debt and reorganize its business, so we can emerge a stronger and more financially secure company better able to compete in the ever-changing communications industry," President and Chief Executive Eric Yeaman said in a statement.

Apparently Carlyle can buy their affiliate's debt cheaper under a bankruptcy markdown. Did they bet on their affiliate's failure? How many of HT credit default swaps do other Carlyle funds own? An ex-Goldman Sachs executive will handle the legal proceedings for Carlyle.