Thursday, January 1, 2009

The Carlyle Group's Hawaiian Telecom Implosion Softened by Credit Bets?

Carlyle Group Senior Adviser and ex-SEC Chair Arthur Levitt argued for more transparency for investors. How might that apply to affiliate Hawaiian Telecom's recent bankruptcy? What are the possible ways Carlyle could secretly profit?

Carlyle's distressed debt fund can pick up HT bonds on the super cheap. Bloomberg reported they trade for 0.5 cents on the dollar, down 102.75 cents due to the bankruptcy declaration. If you could buy your $100,000 mortgage for $500, would that be a good deal?

What if another Carlyle division purchased credit coverage on Hawaiian Telecom bonds? Recall, there is no legal requirement to own the debt to buy such "insurance". It could be an instant jackpot.

As private equity firms and credit derivatives have no regulation, these questions remain academic, until an investigatory body acts.

Co-founder William Conway hates a level playing field. The big money boys know how to profit from failure. Carlyle should have it down by now given their prior implosions at Carlyle Capital, BlueWave Partners, and SemGroup. How did they turn a Hawaiian Telecom sinking into a champagne toasting event? I'm afraid the public will never know.