HAWAIIAN TELCOM: Don't Ask, Don't Tel

Hawaiian Telcom

Don’t Ask, Don’t Tel

~ o ~

June 16, 2009

$400 million offer for Hawaiian Telcom

Phone company prefers its own plan over bid
by local telecommunications firm

BY RICK DAYSOG, Advertiser Staff Writer

Local telecommunications company Sandwich Isles Communications Inc. said it wants to purchase Hawaiian Telcom Inc. for $400 million.

The offer would compete with a reorganization plan proposed earlier this month by the local phone company that had a $460 million price tag.

"The Sandwich Isles proposal represents a far superior restructuring alternative to the 'stand-alone' plan proposed," Sandwich Isles said in a filing in U.S. Bankruptcy Court on Friday.

Established in 1995, Sandwich Isles provides heavily subsidized phone lines to rural customers living on property developed by the Department of Hawaiian Home Lands. The federal government pays Sandwich Isles about $13,000 per customer for providing the service, which is 100 times higher than the average subsidy for rural telephone service on the Mainland.

"As a strategic acquirer with significant expertise in the Hawai'i telecommunications industry, the Sandwich Isles proposal would ensure a smooth transition of service to a proven local operator," the company said.

In its filing, Sandwich Isles said its offer includes $250 million in cash plus $150 million in debt issued by Hawaiian Telcom.

The company said it plans to keep Hawaiian Telcom's 1,400 workers at existing wages, with the exception of senior management.

A deal with Sandwich Isles would require the approval of the bankruptcy court, the state Public Utilities Commission and the Federal Communication Commission.

Hawaiian Telcom said it stands behind its own reorganization plan, which has the support of a key committee of its secured bank lenders, who have a big say on how the bankruptcy proceedings are handled.

"On June 3, Hawaiian Telcom filed its plan of reorganization, which will significantly reduce the company's debt by nearly $790 million, from $1.1 billion to $300 million, and position the company to emerge from bankruptcy a stronger and more financially secure company," Hawaiian Telcom said.

federal loans

Hawaiian Telcom, founded in 1883, is the state's largest phone company with more than 500,000 business and residential customers state- wide.

The company filed for bankruptcy protection Dec. 1 due to its heavy debt load and the loss of thousands of customers to wireless and other competitors.

Besides the seller financing, Sandwich Isles said its purchase will rely on low-cost, federal government loans.

Since 1998, Sandwich Isles has obtained more than $400 million in loans from the U.S. Department of Agriculture.

The company is headed by Albert Hee, the brother of state Sen. Clayton Hee, D-23rd (Kane'ohe, Kahuku).

The company's participation in the government loan program and other subsidies has recently come under the scrutiny of an influential member of Congress.

In March, U.S. Rep. Henry Waxman, D-Calif., said Agriculture Department subsidies received by Sandwich Isles and other local carriers such as Sprint Nextel and Mobi PCS amounted to about $13,000 per phone line per year.

Waxman, chairman of the House Committee on Energy and Commerce, has advocated reforms to the government's high-cost rural phone subsidy program.

rejected earlier

In its filing, Sandwich Isles said company officials met with Hawaiian Telcom's management earlier this year but were rebuffed.

Hawaiian Telcom currently is not required to consider Sandwich Isles' reorganization plan.

After filing for bankruptcy in December, the company had six months to come up with its own reorganization plan without having to consider alternative plans.

U.S. Bankruptcy Judge Lloyd King recently extended that period to June 30 and the company is seeking another extension to Sept. 30.

Sandwich Isles is opposing the latest extension request so it can present its reorganization plan earlier. A hearing is scheduled on July 1.

http://www.kycbs.net/HI-Tel-Sandwich-Isles-Offer.mht

June 5, 2009

Hawaiian Telcom seeks restructuring

Bankruptcy emergence plan cuts owner Carlyle Group
almost completely out

BY RICK DAYSOG, Advertiser Staff Writer

Hawaiian Telcom Inc. could emerge from bankruptcy protection by the end of the year under a restructuring plan proposed by the local phone company.

In a filing in U.S. Bankruptcy Court yesterday, Hawaiian Telcom said it plans to convert more than $1.1 billion in debt to equity, in a move to cut the company's borrowings by $790 million.

The deal, valued at $460 million, also wipes out all but a small portion of The Carlyle Group's interest in the local phone company. Carlyle, a Washington, D.C.-based investment firm, purchased Hawaiian Telcom in 2005 for $1.6 billion.

"The filing of the plan and disclosure statement is an important achievement in our restructuring efforts," said Eric Yeaman, Hawaiian Telcom's president and chief executive officer.

"The plan provides for a significantly deleveraged capital structure, and the terms of the new debt give us greater financial flexibility to execute our business plan and invest in new products, better positioning the company for future success."

The company said its plan has the support of the committee representing the company's secured lenders, A hearing on Hawaiian Telcom's disclosure statement has been set for July 23.

If the disclosure statement is approved by the bankruptcy court, the plan will be put to a vote by Hawaiian Telcom's lenders and other creditors.

The reorganization also requires approval from the state Public Utilities Commission.

Hawaiian Telcom said it will emerge from bankruptcy with a minimum of $45 million in cash, plus a $30 million undrawn revolving credit facility.

The reorganization calls for the company to convert $590 million in senior secured debt into new stock in the reorganized company.

Owners of about $350 million in Hawaiian Telcom senior notes will receive warrants to acquire 12.75 percent of the new equity of the reorganized company and subscription rights to purchase new equity up to $50 million.

The company said it also will obtain a new, five-year $300 million loan once it emerges from bankruptcy.

The Carlyle Group currently owns $428 million in Hawaiian Telcom's stock but that stock will become worthless under the reorganization.

Carlyle will retain a small ownership stake because it is part of the lending group whose loans will be converted into equity. Carlyle currently holds about $6.8 million of the company's $590 million of senior debt.

Founded in 1883, Hawaiian Telcom is the state's largest phone company, with 1,400 workers and annual operating revenues of about $500 million.

The company filed for bankruptcy protection Dec. 1 due to its heavy debt load and the loss of thousands of customers to wireless and other competitors.

Analysts have said the phone company's debt made it difficult to make adequate investments in its infrastructure.

Lowering Hawaiian Telcom's $4.2-million-a-month debt payments would allow the company to revive plans to offer Internet-based video service and Internet-based phone service, they said.

"Reducing the debt will allow the company to put money into new equipment, keep some of its existing customers and attract new customers," said Sam Greenholtz, co-founder of Telecom Pragmatics Inc., a Nashville, Tenn.-based consulting firm.

"It's got to help."

http://www.honoluluadvertiser.com/article/20090605/BUSINESS21/906050325/-1/NLETTER03/Hawaiian+Telcom+seeks+restructuring?source=nletter-

January 7, 2009

Local Hawaiian Telcom investors named

Pacific Business News (Honolulu) - by Randi Petrello and Nanea Kalani

A list of more than 100 Hawaii investors who contributed to the buyout of Hawaiian Telcom in 2005 has been filed in U.S. Bankruptcy Court in Honolulu.

The list of investors is a who’s who of the wealthy and politically connected in Hawaii, all of whom have seen their investments in Hawaiian Telcom wiped out by $425 million in operating losses posted by the telephone company over three years. Hawaiian Telcom filed for Chapter 11 bankruptcy protection on Dec. 1.

The local investors collectively own a 7 percent stake in the phone company.

Washington, D.C.-based private equity firm The Carlyle Group, which bought the assets of Verizon Hawaii in May 2005 for $1.6 billion, owns the remaining 93 percent.

Retired First Hawaiian Bank chairman Walter Dods, who is now chairman of Hawaiian Telcom’s board of directors, told PBN the local investors put up $30 million, including $2 million he and his wife, Diane, contributed.

With a sale price of $1.6 billion and debt of about $1.2 billion, the local investors bought 7 percent of the remaining $400 million in equity, which has since evaporated.

Dods has been the only public figure representing the local investment group, and he personally recruited the investors who took a stake in the company.

“It wasn’t like it was a great state secret, I just didn’t think it was for me to state publicly who invested,” Dods said.

The names of the investors were filed with the bankruptcy court on Dec. 24 with other documents listing creditors and other entities affected by the bankruptcy. The list was first reported Wednesday on local blogger Ian Lind’s Web site, www.ilind.net .

The list consists of 103 Hawaii investors in addition to four Carlyle entities.

Dods said he approached “20 to 30” investors and some recruited friends and family members. Each of those initial investors contributed an average of $1 million, all of which has been lost.

“I feel obviously very badly about that and did the best, tried the best I could but I don’t control everything that happens in the world and some investments obviously don’t work out,” Dods said.

Asked if the soured investments had hurt any relationships, Dods said: “I don’t feel like ’ve lost any friends over this.”

Among the local investors are: Mark Fukunaga, chairman and CEO of Servco Pacific, whose company is also listed as an investor; David Carey and Richard Kelley of Outrigger Enterprises; Bert Kobayashi, chairman and CEO of Kobayashi Development Group; Warren Luke, chairman, president and CEO of Hawaii National Bank; Warren Haruki, president and CEO of Grove Farm and a former president of Verizon Hawaii; Robert Wo, president of C.S. Wo & Sons; Alan Pfleuger, president of Pfleuger Automotive Group and Meredith Jayne Ching, senior vice president at Alexander & Baldwin.

Here is the full list of investors, according to documents filed in bankruptcy court in Honolulu:

Stephen J. Berman;

Kathryn J. Carey;

W. David P. Carey III,;

Carl A. Carlson;

The Carlyle Group Inc.;

Carlyle Hawaii Partners LP;

Carlyle Partners III Hawaii LP;

Carlyle Partners III LP;

Barbara Tom Ching;

Cedric Ming-Kai Ching;

Earl Ming-To Ching;

Edric M. Ching;

Eldon Ming-Te Ching;

Han Hsin Ching;

Han Ping Ching;

Leslie M. Ching;

Meredith Jayne Ching;

CP III Coinvestment LP;

CS Wo & Sons Ltd.;

Diane N. Dods Revocable Living Trust;

Diane N. Dods;

Walter A. Dods, Jr.;

Everett R. Dowling;

East West Capital Partners LLC;

Alice M. Fukunaga;

Benjamin T. Fukunaga;

Eric S. Fukunaga;

Grace Fukunaga;

Mark H. Fukunaga;

Paul Mullin Ganley;

Alan M. Goda;

J. Stephen Goodfellow;

Warren Haruki;

Hawaii Partners LP;

Karly Heyer;

Higgins Community Property Trust;

Ronald D. Higgins;

Michael K. Hirai;

Hong & Kwock, Attorneys, a Law Corp.;

Profit Sharing Plan;

Michael David Hong;

David C. Hulihee;

HYB Corp. Consolidated Profit Sharing Plan;

Robert Ichikawa;

Melvyn T. Iwaki;

Marcy Carol Zilber Jackson;

Melissa S. A. Jackson;

Shane M. Jackson;

James Stephen and Denise D. Goodfellow Main Trust;

JKS Partners LP;

JKT Capital Partners LLC;

Joseph J. Zilber Voluntary Trust;

Kahala Hi Telcom LLC;

Charles R. Kelley;

Jennifer S. Kelley;

Richard R. Kelley;

KF Telcom LLC;

KG Telcom LLC;

KJL Investments LLC;

Bert A. Kobayashi;

Dale T. Kobayashi;

James H. Kobayashi;

Patrick K. Kobayashi;

Ronald H. Kobayashi;

Leonard K. P. Leong;

Beatrice Luke;

Carolyn C. Luke;

Catherine Luke;

Warren Luke;

Warren K. K. Luke;

Maui Quest LLC;

Bill Mills;

MJM Partnership LLP;

Edmund Nakano;

Nicholas Ng Pack;

Paul Mullin Ganley Trust;

Alan Pflueger;

Raymond A. Ranelli;

Gregory Ratte;

RCCI Management LLC;

Richard Eizo Tanaka Revocable Trust;

Scott Rolles;

James Schuler;

Servco Pacific;

Richard Eizo Tanaka;

TC Group III LLC;

TC Group III LP;

TC Group LLC;

TCG Holdings LLC;

Dr. Joseph Triggs;

John K. Tsui;

Peter J. Uehara;

Waikoloa Heights Investment Partners;

Walter A. Dods Jr., Revocable Living Trust;

Warren K. K. Luke & Carolyn C. Luke Trust;

Thomas P. Whittemore;

Bennett R. Wo;

C. Scott Wo;

Michael J. Wo;

Robert C. Wo;

Robert W. Wo;

Wendell J. Wo;

John T. Wu;

Robert T. Wu;

Paul Yonamine;

Joseph J. Zilber;

Marilyn Zilber.

March 28, 2008

Carlyle Group faces
Hawaiian Telcom heat

By admin, FierceTelecom

Fourth quarter 2007 financial results for Hawaiian Telcom, one of the oldest ILECs in the U.S., are scheduled to be reported on Monday, but The Wall Street Journal is reporting today that the owning the company has turned out to be a tremendous challenge for private equity firm Carlyle Group. Carlyle acquired the telco in 2005 for $1.6 billion from Verizon Communications, but mounting customer service and back office problems led to increased spending to fix the problems, lay-offs and a CEO switch.

When a PE-acquired company stumbles after a deal, the inclination is to blame the greedy buyer who probably knows nothing about telecom anyway, but that lets the experienced telecom managers in the acquired company off the hook too easily. Strangely, employees and customers sometimes end up pining for the former owner, which in most cases was a larger, more experienced telecom company. But to do so is to forget who sold them out and why.

The new CEO brought in by Carlyle, a company with other well-documented financial troubles of its own, is short on telecom experience but long on turnaround experience. If you worked for, or were being served by a telecom company in financial trouble, which kind of experience would earn more of your faith?

Source URL:

http://www.fiercetelecom.com/story/carlyle-group-faces-hawaiian-telcom-heat/2008-03-28

Mar 14, 2008

"SPITZER WAS SILENCED."

THE $200 BILLION BAIL-OUT FOR PREDATOR BANKS
AND SPITZER CHARGES ARE INTIMATELY LINKED

By Greg Palast

Reporting for Air America Radio's Clout*

While New York Governor Eliot Spitzer was paying an 'escort' $4,300 in a hotel room in Washington, just down the road, George Bush's new Federal Reserve Board Chairman, Ben Bernanke, was secretly handing over $200 billion in a tryst with mortgage bank industry speculators.

Both acts were wanton, wicked and lewd. But there's a BIG difference. The Governor was using his own checkbook. Bush's man Bernanke was using ours.

This week, Bernanke's Fed, for the first time in its history, loaned a selected coterie of banks one-fifth of a trillion dollars to guarantee these banks' mortgage-backed junk bonds. The deluge of public loot was an eye-popping windfall to the very banking predators who have brought two million families to the brink of foreclosure.

Up until Wednesday, there was one single, lonely politician who stood in the way of this creepy little assignation at the bankers' bordello: Eliot Spitzer.

Who are they kidding? Spitzer's lynching and the bankers' enriching are intimately tied.

HOW? FOLLOW THE MONEY.

The press has swallowed Wall Street's line that millions of US families are about to lose their homes because they bought homes they couldn't afford or took loans too big for their wallets. Ba-LON-ey. That's blaming the victim.

Here's what happened. Since the Bush regime came to power, a new species of loan became the norm, the 'sub-prime' mortgage and it's variants including loans with teeny 'introductory' interest rates. From out of nowhere, a company called 'Countrywide' became America's top mortgage lender, accounting for one in five home loans, a large chuck of these 'sub-prime's.

Here's how it worked: The Grinning Family, with US average household income, gets a $200,000 mortgage at 4% for two years. Their $955 a month payment is 25% of their income. No problem. Their banker promises them a new mortgage, again at the cheap rate, in two years. But in two years, the promise ain't worth a can of spam and the Grinnings are told to scram - because their house is now worth less than the mortgage. Now, the mortgage hits 9% or $1,609 plus fees to recover the 'discount' they had for two years. Suddenly, payments equal 42% to 50% of pre-tax income. Grinnings move into their Toyota.

Now, what kind of American is 'sub-prime'. Guess. No peeking. Here's a hint: 73% of HIGH INCOME Black and Hispanic borrowers were given sub-prime loans versus 17% of similar-income Whites. Dark-skinned borrowers aren't 'stupid', they had no choice. They were 'steered' as it's called in the mortgage sharking business.

"Steering," sub-prime loans with usurious kickers, fake inducements to over-borrow, called 'fraudulent conveyance' or 'predatory lending' under US law, were almost completely forbidden in the olden days (Clinton Administration and earlier) by federal regulators and state laws as nothing more than fancy loan-sharking.

But when the Bush regime took over, Countrywide and its banking brethren were told to party hardy "it was OK now to steer'm, fake'm, charge'm and take'm."

BUT THERE WAS THIS ANNOYING PARTY-POOPER.

The Attorney General of New York, Eliot Spitzer, who sued these guys to a fare-thee-well. Or tried to.

Instead of regulating the banks that had run amok, Bush's regulators went on the warpath against Spitzer and states attempting to stop predatory practices. Making an unprecedented use of the legal power of 'federal pre-emption', Bush-bots ordered the states to NOT enforce their consumer protection laws.

Indeed, the feds actually filed a lawsuit to block Spitzer's investigation of ugly racial mortgage steering. Bush's banking buddies were especially steamed that Spitzer hammered bank practices across the nation using New York State laws.

Spitzer not only took on Countrywide, he took on their predatory enablers in the investment banking community. Behind Countrywide was the Mother Shark, its funder and now owner, Bank of America. Others joined the sharkfest: Goldman Sachs, Merrill Lynch and Citigroup's Citibank made mortgage usury their major profit centers. They did this through a bit of financial legerdemain called 'securitization.'

What that means is that they took a bunch of junk mortgages, like the Grinnings, loans about to go down the toilet and re-packaged them into 'tranches' of bonds which were stamped 'AAA' - top grade - by bond rating agencies. These gold-painted turds were sold as sparkling safe investments to US school district pension funds and town governments in Finland (really).

When the housing bubble burst and the paint flaked off, investors were left with the poop and the bankers were left with bonuses. Countrywide's top man, Angelo Mozilo, will 'earn' a $77 million buy-out bonus this year on top of the $656 million - over half a billion dollars - he pulled in from 1998 through 2007.

BUT THERE WERE RUMBLINGS THAT THE PARTY WOULD SOON BE OVER.

Angry regulators, burned investors and the weight of millions of homes about to be boarded up were causing the sharks to sink. Countrywide's stock was down 50%, and Citigroup was off 38%, not pleasing to the Gulf sheiks who now control its biggest share blocks.

Then, on Wednesday of this week, the unthinkable happened. Carlyle Capital went bankrupt. Who? That's Carlyle as in Carlyle Group. James Baker, Senior Counsel. Notable partners, former and past: George Bush, the Bin Laden family and more dictators, potentates, pirates and presidents than you can count.

The Fed had to act. Bernanke opened the vault and dumped $200 billion on the poor little suffering bankers. They got the 'public treasure' and got to keep the Grinning's house. There was no 'quid' of a foreclosure moratorium for the 'pro quo' of public bail-out. Not one family was 'saved,' but not one banker was left behind.

Every mortgage sharking operation shot up in value. Mozilo's Countrywide stock rose 17% in one day. The Citi sheiks saw their company's stock rise $10 billion in an afternoon.

And that very same day the bail-out was decided - what a coinkydink! - the man called "The Sheriff of Wall Street" was cuffed.

SPITZER WAS SILENCED.

Do I believe the banks called Justice and said "Take him down today!" Naw, that's not how the system works. But the big players knew that unless Spitzer was taken out, he would create enough ruckus to spoil the party. Headlines in the financial press, one was 'Wall Street Declares War on Spitzer' - made clear to Bush's enforcers at Justice who their number one target should be. And it wasn't Bin Laden.

It was the night of February 13 when Spitzer made the bone-headed choice to order take-out in his Washington Hotel room. He had just finished signing these words for the Washington Post about predatory loans:

'Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which he federal government was turning a blind eye.'

Bush, said Spitzer right in the headline: 'was the 'Predator Lenders' Partner in Crime.' The President, said Spitzer, was a fugitive from justice. And Spitzer was in Washington to launch a campaign to take on the Bush regime and the biggest financial powers on the planet.

Spitzer wrote: When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners the Bush administration will not be judged favorably."

FALLEN ON HIS OWN GUN

But now, the Administration can rest assured that this love story - of Bush and his bankers - will not be told by history at all ''now that the Sheriff of Wall Street has fallen on his own gun.''

A note on 'Prosecutorial Indiscretion.'

Back in the day when I was an investigator of racketeers for government, the federal prosecutor I was assisting was deciding whether to launch a case based on his negotiations for air-time with 60 Minutes. I'm not allowed to tell you the prosecutor's name, but I want to mention he was recently seen shouting: "Florida is Rudi country! Florida is Rudi country!"

Not all crimes lead to federal bust or even public exposure. It's up to something called 'prosecutorial discretion.'

Funny thing, this "discretion." For example, Senator David Vitter, Republican of Louisiana, paid Washington DC prostitutes to put him in diapers (ewww!), yet the Senator was not exposed by the US prosecutors busting the pimp-ring that pampered him.

Naming and shaming and ruining Spitzer - rarely done in these cases - was made at the 'discretion' of Bush's Justice Department.

Or maybe we should say, 'indiscretion.'

************

* Listen to Palast on Clout at http://www.GregPalast.com

Greg Palast, former investigator of financial fraud, is the author of the New York Times bestsellers Armed Madhouse and The Best Democracy Money Can Buy.

-0-

Fwd. by the Foreign Press Foundation - Related links:

* But where does all the loot go, also via the 'Central Banks' many people are wondering? Well, for instance via the privately owned Bank of England, and all other so called 'central banks' of this cartel, it is 'recycled' through the rather secret 'head office' of this London group in Basle, Switzerland. The likewise privately owned 'Bank of International Settlements', the BIS, which is functioning as one of the main 'central banks' to central banks. And it is difficult to believe, but their BIS bank has greater immunity than a sovereign nation, is accountable to no one, runs global monetary affairs and is privately owned. - BIS Url.: http://www.augustreview.com/index.php?option=com_content&task=view&id=7&Itemid=4

And it may be difficult for many of us to grasp, but it is true: none of the humanoids involved in 'The City', at the by them owned 'Bank of England' or at the Swiss based BIS is ever anywhere on earth accountable for what is done to you, your family or friends, or anybody else, including countries and continents. The 'Board' has all the same names, the known vultures are there, like Wolfowitz, Greenspan, Bernanke etc. - as their money-printing business in the US - the Federal Reserve which also has the cartel as private banking owners. The bookkeepers and usurers are absolutely immune and there is NO law nor any kind of court on this earth which ever can stop them. They think...

Many of them operate from 'The City' their own 'state within a state' in London, England, where the 'evil empire' can be found and the 'Board of Directors' of the so called 'Evil empire' - their Animal Farm - which is built on the corpses of millions of human beings. For those who don't know it yet. - Url.: http://tinyurl.com/2zj7wl

* The "visible and audible leaders" are mere puppets who dance on command. They have no power. They have no authority. In spite of all the outward show they are mere pawns in the game being played by the financial elite. - Url.: http://tinyurl.com/2zj7wl

* HITLER: AN OFFICER AND A GENTLEMAN? - History's warning regarding a compliant media. - Url.: http://tinyurl.com/2xcbce

*NEWSPAPERS (AND OTHER MEDIA) MAINTAIN THAT THEY ARE ENTITLED BY A “PRIVILEGE” TO LIE, etc., by proxy – that is, by printing the lies, etc. of others without verification and/or qualification. Yet, that is not the whole of it. -

Url.: http://tinyurl.com/3a8c9p

* WHY U.S. AMERICANS (AND MANY IN OTHER COUNTRIES) WILL BELIEVE ALMOST ANYTHING THEIR 'GOVERNMENT' AND PROPAGANDA MEDIA TELL THEM -

Url.: http://www.rense.com/general78/believe.htm

* THE US IS A 'CRIMOCRACY' - Christopher Bollyn: "This is how the U.S. government, which I call a "crimocracy" works. -

Url.: http://www.rumormillnews.com/cgi-bin/forum.cgi?read=110673

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Editor: Henk Ruyssenaars

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For more, GO TO > > > The Chubb Group; Confessions of a Whistleblower; Dirty Gold in Goldman Sachs; Dirty Money, Dirty Politics & Bishop Estate; Googling for the Ghost of Ken Lay; Marsh & McLennan: The Marsh Birds; Nests Along Wall Street; The Silence of The Whistleblowers; The Story of Enron;

March 7, 2008

Party seems to be over
for buy-out firms

By Henny Sender in New York, The Financial Times

When Carlyle Group established its now struggling mortgage-backed fund and decided to list it, last year, it seemed like a smart and even risk-free thing to do. Today, with the credit markets in full meltdown, that plan seems both arrogant and hazardous.

The private equity firms were the most powerful players in capital markets across the globe and were buying up ever bigger public companies. Carlyle’s co-founder David Rubenstein appeared at conferences, predicting that $80bn-$100bn buy-outs would soon be possible.

Investors were throwing money at private equity firms. They, in turn, were keen to attract as much of that money as possible because many of the leading private equity groups were considering plans to go public and part of the dynamic was to have size and scale, which meant having as many assets under management and collecting as many fees as possible.

Carlyle marketed its mortgage-backed fund to the investors in its flagship buy-out funds as a safe place for them to park their cash, while waiting to write cheques for deals, such as the $15bn purchase of Hertz.

The idea was doubly seductive for Carlyle since it would swell its assets under management and its fees. It was equally attractive for investors since interest rates were low and the fund promised lucrative returns. Listing would help the fund grow even more quickly.

The fund also looked attractive because after all what could be safer than its triple-A-rated mortgage securities? It was nothing like the complicated and high-risk vehicles, such as the structured investment vehicles (SIVs), which borrowed short-term and lent long-term, and had already blown up months before.

Only a careful read of the offer memo would have informed would-be investors that the fund had the ability to use borrowed money ... and plenty of it – more than 90 cents on the dollar.

That in turn exposed the fund to twin risks. If there were losses in the value of the debt, those losses would be magnified by the use of leverage. Secondly, the fund was exposed to the risk that skittish banks might one day cut back credit lines.

That second fear appeared remote even eight months ago, when the fees the private equity firms paid Wall Street were measured in the hundreds of millions of dollars, making the buy-out groups the banks most lucrative customers. That the banks would dare to stand up to these powerful clients seemed inconceivable.

Today, however, after the market capitalisation of most banks has been halved, and with their own backs to the wall, those same banks are in a very different position.

“There comes a time when the banks have to ask our clients to live up to their side too,” says the head of the group which deals with private equity firms at one major US bank. There are only so many times the banks can forestall or turn a blind eye. They have to say you put up the margin or we are taking the collateral.”

Today both the Carlyle fund and a similar Kohlberg Kravis Roberts fund are in bad shape, introducing a rare bout of humility for the two firms which launched them. Private equity firms such as TPG, which refrained from such diversification and looked ultra-conservative in 2007, now look far less tarnished by contrast.

It is likely that the equity of Carlyle’s fund will be wiped out and that if the financing evaporates, Carlyle will be forced to liquidate the fund. In a release on Friday, Carlyle noted “additional margin calls and increased collateral requirements could quickly deplete its liquidity and impair its capital”.

February 9, 2008

HawTel chiefs ring up big pay

By Jennifer Sudick, Honolulu Star-Bulletin

jsudick@starbulletin.com

Hawaiian Telcom's new upper management team comes with a price tag more than six times that of former CEO Michael Ruley, who was abruptly fired Monday in favor of a turnaround expert brought in by Washington, D.C.-based owner Carlyle Group.

The hiring of Stephen Cooper, chairman of Kroll Zolfo Cooper, a New York restructuring advisory and interim management company, as well as Kevin Nystrom, a senior director at the firm, as the company's chief operating officer, will cost Hawaiian Telcom a base fee of $600,000 a month -- plus bonuses based on improvements in the company's earnings. The chief operating officer position was created for Nystrom.

Ruley's compensation totaled $1.14 million in 2006, according to the company's latest annual filing.

The new executives' base pay, which amounts to $7.2 million a year, is what the company "feels is appropriate based on the experience that both Cooper and Nystrom have had over the years," spokesman Joel Matsunaga said.

Cooper, who replaced Kenneth Lay in 2002 as interim head of since-dissolved Enron Corp., has led a number of restructuring projects, including the bankruptcy of American Home Mortgage last year. Nystrom has served as director of restructuring of American Home Mortgage since August.

The fee, disclosed yesterday in a filing with the U.S. Securities and Exchange Commission, also covers any additional associate directors the new team might hire. Matsunaga declined to say how many that would be.

http://starbulletin.com/2008/02/09/news/story01.html

Dec. 07, 2007

Commentary: The CIA's Gift to
Conspiracy Theorists

By Robert Baer, Time

The CIA has proved, once again, that the cover up is worse than the crime. Or at least let's hope that's the case.

CIA Director Gen. Michael Hayden has admitted that in 2005 the CIA destroyed two videotapes of interrogations of al-Qaeda prisoners, including a central figure in 9/11, Abu Zubaydah. Hayden said the tapes were destroyed to protect the identities of the CIA interrogators from members of al-Qaeda and other terrorists who might try to retaliate. He also claims that the tapes were made to safeguard against unlawful treatment of detainees, and that they were only destroyed after it was confirmed that suspects were not being tortured.

At a time when Congressional Democrats are trying once again to pass a torture ban, it's a given that the revelation is going to further inflame the torture debate — since the tapes apparently showed harsh interrogation techniques. The assumption will be that the CIA did not want the tapes seen in public because they are too graphic and could lead to indictments.

But more to the point, the revelation will raise another question: What other evidence has the CIA destroyed? And can the CIA be trusted to tell us? The CIA had told the 9/11 Commission, when it formally requested such materials, that there was no taping of interrogations. CIA lawyers also told federal prosecutors trying the Zacarias Moussaoui terror case that the agency did not possess recordings of interrogations sought by the judge and Moussaoui's defense lawyers. The CIA insists that the tapes destroyed were not the ones in question.

I would find it very difficult to believe the CIA would deliberately destroy evidence material to the 9/11 investigation, evidence that would cover up a core truth, such as who really was behind 9/11. On the other hand I have to wonder what space-time continuum the CIA exists in, if they weren't able to grasp what a field day the 9/11 conspiracy theorists are going to have with this — especially at a time when trust for the government is plumbing new depths.

I myself have felt the pull of the conspiracy theorists — who believe that 9/11 was an inside job, somehow pulled off by the U.S. government. For the record, I don't believe that the World Trade Center was brought down by our own explosives, or that a rocket, rather than an airliner, hit the Pentagon. I spent a career in the CIA trying to orchestrate plots, wasn't all that good at it, and certainly couldn't carry off 9/11. Nor could the real pros I had the pleasure to work with.

Still, the people who think 9/11 was an inside job might easily be able to believe that Abu Zubaydah named his American accomplices in the tape that has now been destroyed by the CIA.

It isn't going to help that the Abu Zubaydah investigation has a lot of problems even without destroyed evidence. When Abu Zubaydah was arrested in Pakistan in 2002, two ATM cards were found on him. One was issued by a bank in Saudi Arabia (a bank close to the Saudi royal family) and the other to a bank in Kuwait. As I understand it, neither Kuwait nor Saudi Arabia has been able to tell us who fed the accounts.

Also, apparently, when Abu Zubaydah was captured, telephone records, including calls to the United States, were found in the house he was living in. The calls stopped on September 10, and resumed on September 16. There's nothing in the 9/11 Commission report about any of this, and I have no idea whether the leads were run down, the evidence lost or destroyed.

If this sounds like paranoia, it is. But the CIA certainly is not helping by destroying evidence. And they should know better than to destroy evidence in the biggest criminal case in American history. More than anything what we need right now is complete and total transparency on 9/11.

Robert Baer, a former CIA field officer assigned to the Middle East, is TIME.com's intelligence columnist and the author of See No Evil and, most recently, the novel Blow the House Down

http://www.time.com/time/nation/article/0,8599,1692518,00.html

May 22, 2004

Isle ties vital to
Verizon buyer

Local investors join a D.C.-based
firm in the $1.65 billion phone
company deal

By Dave Segal, Star-Bulletin

The private-equity Carlyle Group, which announced yesterday it was buying Verizon Hawaii for $1.65 billion, said it wants to return the telephone company to its local roots.

And to prove its commitment, the Washington, D.C.-based company has brought in BancWest Chairman and Chief Executive Walter Dods to lead a group of local investors.

"A big part of our plan is to return Verizon Hawaii to its roots as a local phone company, empowering local management," said William Kennard, Carlyle's managing director and a former Federal Communications Commission chairman. "It's sort of a version of 'Back to the Future,' if you will."

Dods, who will be retiring as chairman and CEO of First Hawaiian Bank and parent BancWest at the end of this year, stressed that his investment is personal and has nothing to do with the bank.

"I'm a strong believer in community involvement, and I've talked to the Carlyle Group (and Kennard) and he strongly agrees with the idea of bringing local community involvement back to Hawaii," Dods said. "I've signed up a group of local investors to be part of the transaction."

Dods declined to divulge any of their names.

But Kennard said the group of local business people Dods assembled represents a cross section of business, banking, various retail operations, real estate and hospitality.

"The notion here is that we're just not paying lip service to the desire to reconnect to the local community," Kennard said. "We want local business leaders investing alongside of us."

The Carlyle Group, which has more than $19 billion under management, already has a presence in Hawaii through Horizon Lines LLC, which it purchased from CSX Corp. for $300 million last year. Horizon is the second-biggest ocean shipping operator in the state behind Matson Navigation Co.

"We think that this is a great market, and we're excited about the prospect of investing more money here," Kennard said.

Kennard wouldn't break down the cash and debt structure of the deal with parent company Verizon Communications Inc., but a source familiar with the situation said that each local investor is putting in at least $1 million.

Kennard said the Carlyle Group is still evaluating the current management team and isn't ready yet to make any decisions. Verizon Hawaii is headed by Melvin Horikami, who took over as president for the retired Warren Haruki in September. Kennard wouldn't say whether Haruki was involved with the Carlyle purchase, but other sources said Haruki will play a role.

Kennard said all of Verizon Hawaii's employees will retain their jobs, and there eventually will be an increase in the work force as Carlyle brings back to Hawaii jobs that had been handled on the mainland by Verizon's parent.

Kennard said the former GTE Hawaiian Tel, which was renamed Verizon Hawaii in 2000 when GTE Corp. merged with Bell Atlantic, also will get a new name.

"We don't have a name we can disclose right now, but I can assure you it will be a name that conveys the local character of the company," Kennard said.

The transaction, which Kennard said had been eight months in the making, needs approval from the state Public Utilities Commission, the FCC and the U.S. Department of Justice. He said he was optimistic that Carlyle could receive PUC approval by the end of this year and that the deal could close early in the first quarter. Kennard said he hopes to file an application with the PUC within a month.

Kris Nakagawa, chief legal counsel for the PUC, said complex cases such as the Carlyle-Verizon Hawaii deal normally take six months to a year for the three-member commission to render a decision. He said there was no way now to offer a precise timetable since there are certain statutes and rules that Carlyle must follow. Nakagawa also said objections from other parties could extend the decision-making process.

The Carlyle Group said the deal includes Verizon Hawaii's local telephone operations, print directory, long-distance operations and Internet service provider business.

Verizon Wireless operations and assets in Hawaii are not included in the transaction. Verizon also will retain two units in the state that provide services for federal government customers: Verizon Federal Network Systems and Verizon Federal Inc.

Verizon Hawaii, which has about 1,700 employees, had sales last year of $610 million, operating income of $58 million and depreciation expense of $111 million. The company has 707,000 local phone lines.

"We will offer new services to our customers, including expanded broadband, and we expect to add many new jobs after the acquisition," Kennard said. "Importantly, rates will stay the same as we reposition the business as a true local company."...

Carlyle Group

The global investment firm buys companies around the world, with a concentration in communications.

Offices: Headquarters in Washington, D.C., 23 offices in 14 countries

Assets: $19 billion under management

Portfolio companies: More than 150,000 employees and $31 million in revenues

Hawaii presence: Purchased shipper Horizon Lines LLC from CSX Corp. for $300 million last year.

Managing director: Former Federal Communications Commission Chairman William Kennard

Prominent advisers: Former President George H.W. Bush; former British Prime Minister John Major; former U.S. Secretary of State James A. Baker, III; former U.S. Secretary of Defense Frank C. Carlucci; former U.S. Speaker of the House and Ambassador to Japan Thomas S. Foley

Web site: www.carlyle.com

http://starbulletin.com/2004/05/22/news/story2.html

May 22, 2004

Isle ties vital to
Verizon buyer

Local investors join a D.C.-based
firm in the $1.65 billion phone
company deal

By Dave Segal, Star-Bulletin

The private-equity Carlyle Group, which announced yesterday it was buying Verizon Hawaii for $1.65 billion, said it wants to return the telephone company to its local roots.

And to prove its commitment, the Washington, D.C.-based company has brought in BancWest Chairman and Chief Executive Walter Dods to lead a group of local investors.

Dods, who will be retiring as chairman and CEO of First Hawaiian Bank and parent BancWest at the end of this year, stressed that his investment is personal and has nothing to do with the bank.

Dods declined to divulge any of their names.

But Kennard said the group of local business people Dods assembled represents a cross section of business, banking, various retail operations, real estate and hospitality.

"The notion here is that we're just not paying lip service to the desire to reconnect to the local community," Kennard said. "We want local business leaders investing alongside of us."

"We think that this is a great market, and we're excited about the prospect of investing more money here," Kennard said.

Kennard said the former GTE Hawaiian Tel, which was renamed Verizon Hawaii in 2000 when GTE Corp. merged with Bell Atlantic, also will get a new name.

"We don't have a name we can disclose right now, but I can assure you it will be a name that conveys the local character of the company," Kennard said.

The Carlyle Group said the deal includes Verizon Hawaii's local telephone operations, print directory, long-distance operations and Internet service provider business.

Carlyle Group

The global investment firm buys companies around the world, with a concentration in communications.

Offices: Headquarters in Washington, D.C., 23 offices in 14 countries

Assets: $19 billion under management

Portfolio companies: More than 150,000 employees and $31 million in revenues

Hawaii presence: Purchased shipper Horizon Lines LLC from CSX Corp. for $300 million last year.

Managing director: Former Federal Communications Commission Chairman William Kennard

Web site: www.carlyle.com

http://starbulletin.com/2004/05/22/news/story2.html

~ ~ ~

October 21, 1999

TOP POLITICIANS LINKED TO
PENSION FUND DEALS

The Hartford Courant

Connecticut State Treasurer Denise L. Nappier shone the light Wednesday on seldom-seen machinations that have put millions into the pockets of well-connected “finders” in state pension investment deals — and some of the state’s best-known politicians were caught in the glare.

Nappier, responding to the scandal surrounding her now-disgraced predecessor, Paul J. Silvester, released a list of those who have received finder’s fees and other compensation in treasurer’s office deals since 1991....

One firm that has given Nappier an incomplete response is the Carlyle Group — which has figured prominently in the Silvester scandal....

Silvester invested $50 million in pension funds with Carlyle, which has been a client of Wayne Berman, a Washington-based consultant and major fund-raiser for Texas Gov. George W. Bush’s presidential campaign....

Berman gave Silvester a job with his new business consulting firm, Park Strategies, after his term ended....

For more, GO TO > > > A Connecticut Yankee in King Kamehameha’s Court

April 23, 2001

Money Watch
By Vishesh Kumar

CityNet Telecommunications has
a dirty little secret

...but it still manages to walk away with $275 million in funding.
CityNet Telecommunications

CEO: Robert G. Berger
Location: Silver Spring, Md.
Funding: $275 million in equity and debt, following a $100 million investment in April 2000
The Pitch: Stringing optic cables inside sewer lines to bring broadband access to buildings

Don't laugh when you hear CityNet Telecommunications' dirty little secret: The company brings fiber-optic networks to office buildings by laying lines in sewers.

CityNet has outfitted robots with digital cameras and sent them into wastewater systems. The robots install stainless steel tubes containing fiber lines along the walls of sewer pipes. Initially developed by a Swiss firm to clean sewers, the robots go through tunnels as narrow as eight inches across.

The stingy private-equity market has opened the floodgates for CityNet. The company raised $175 million in equity and $100 million in debt financing last week, one of the largest private rounds of investment for any company this year.

The Carlyle Group, a buyout and private investment firm, led the charge, which also included Berkshire Partners, CIBC Capital Partners, Crescendo Ventures and Trimaran Capital Partners....

CityNet went to the Carlyle Group to lead the round because of the firm's global reach and track record in telecommunications. Carlyle has also invested in Global Crossing, Nextel and Nortel.

"In addition to being able to write a big check," says Rosenblum, "the fact that we have strong industry focus and operations in Europe and elsewhere will be a big help."

Overcapacity Puts Squeeze
On Network Wholesalers

By Fred Donovan

This article first appeared in PBI Media's Fiber Optics News

WASHINGTON – Carriers that specialize in selling wholesale capacity are in for a bumpy ride because of overcapacity in deployed fiber optics networks. So concluded a panel of telecom executives participating in the Global Traffic Meeting (GTM) held here last week.

Although the GTM was not open to the public, a group of executives from major carriers shared their views of the international marketplace during a "telecom summit" held in conjunction with the meeting. . . .

James P. Martino, Bermuda-based Global Crossing's [GX] vice president for global cost of access, said the drop in prices the company is seeing in its wholesale business is pushing it to target the retail multinational corporate market. Global Crossing has deployed a global fiber optic network that links 200 cities in 20 countries, he explained. . . .

Depressing Telecom Story

William Kennard, former chairman of the Federal Communications Commission and, currently, the managing director of the Washington-based Carlyle Group's telecom and media practice, observed that there is a "depression" in the telecom market. "The irrational exuberance has been replaced by an irrational pessimism," he said.

Kennard said that there is consensus among political leaders around the world that it's best to have open, privatized telecom markets in order to give consumers access to the Internet. . . .

~ ~ ~

For more on Global Crossing, which filed for bankruptcy protection on January 28, 2002, GO TO > > > Global Crossing

And to see how a company called Sandwich Isles Communications is spending YOUR tax money, GO TO > > > Predators in Paradise

For the movie, Exposed: The Carlyle Group

GO TO...

http://www.informationclearinghouse.info/article3995.htm

# # #

And, for more da kine stuff that floats in
the cesspools at the Carlyle Group...

GO TO

The Carlyle Group: Birds that Drink from Cesspools

A Connecticut Yankee in King Kamehameha’s Court

A Flock of Flying Elephants