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Date and page printing time: November 21th 2009 05:01 GMT
Trade's Tools | The FOREX market news
DJMN: Creditors Ask Judge To Reject Hawaiian Telcom Chapter 11 Plan
By Eric Morath
Of DOW JONES DAILY BANKRUPTCY REVIEW
Hawaiian Telcom Communications Inc.'s creditors are asking a judge to reject the phone company's bankruptcy-exit plan, saying it's an attempt to hand control of the company to lenders "by any means necessary."
In papers filed Monday with the U.S. Bankruptcy Court in Honolulu, the committee representing the company's unsecured creditors said the plan is "unconfirmable" because unsecured creditors would recover less than two cents on the dollar while lenders and company management are slated to receive "windfalls."
Recoveries for Hawaiian Telcom's unsecured creditors, including bondholders, "pale in comparison" to what lenders and company management are slated to receive.
Hawaiian Telcom owes the unsecured creditors more than $500 million. They claim they're entitled to repayment of at least $139.4 million.
The company's bankruptcy-exit plan would give senior lenders 100% of the reorganized company's stock and a new $300 million secured term loan to satisfy $592.5 million in debt.
Under the plan, general unsecured creditors, owed $40 million, would receive $500,000 in cash. Senior bondholders would receive warrants to purchase stock, and junior bondholders would be wiped out.
The unsecured creditors say they're entitled to a much larger recovery because lenders don't hold a lien on nearly 19,000 easements and certain land parcels over which Hawaiian Telcom runs its phone lines.
The land and easements are worth $150 million to an operating phone company, the unsecured creditors say, but Hawaiian Telcom values them at just $31.7 million, what the assets would likely fetch in liquidation.
The unsecured creditors say the company's reorganization plan is flawed because it prices assets that lenders hold as collateral at their going-concern value but assigns liquidation values to the assets that could contribute to unsecured creditors' recoveries.
Creditors also complained that the plan provides for a management-incentive program that would allow executives to acquire 10% of Hawaiian Telcom's equity.
The incentive program is "excessive and insulting" especially because creditors are set to receive a "near 0% distribution."
Hawaiian Telcom says the Chapter 11 plan, which sheds $530 million in debt, gives it the flexibility to strengthen its business and invest in new products.
The company will ask the Honolulu bankruptcy court to confirm the restructuring plan at a Nov. 9 hearing.
Much of the Hawaiian Telcom's debt burden stems from private-equity firm Carlyle Group's leveraged buyout of the company from Verizon Communications Inc. (VZ) in 2005. Carlyle's stake would be wiped out under the proposed plan.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)
-By Eric Morath, Dow Jones Daily Bankruptcy Review; 202-862-9279; eric.morath@dowjones.com
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(END) Dow Jones Newswires
November 03, 2009 15:41 ET (20:41 GMT)
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