Amfac files bankruptcy in twilight of 'Big Five'
By Dan Nakaso
Advertiser Staff Writer
Amfac Hawaii LLC, the descendant of one of Hawai'i's "Big Five" companies that once ruled the Islands, filed for Chapter 11 bankruptcy protection yesterday in Chicago along with eight of its subsidiaries.
The company was worth $2.4 billion in the mid-1980s, but over the years had dwindled primarily to four closed sugar mills, golf courses on O'ahu and Maui, 4,000 acres of land on Maui and about $325 million worth of debt.
In 1996 Amfac employed nearly 1,000 people. Today it has 135.
Gary Nickele, who took over as president of Amfac Hawaii last year, said yesterday the bankruptcy plan did not call for any reductions in employees other than the scheduled shutdown of the Kaua'i power plant this year.
"The company and its subsidiaries will continue operations during bankruptcy, and expect to emerge from bankruptcy protection within several months," Nickele said.
He said most of the company's financial difficulties result from its agricultural operations, which have lost about $120 million since 1989.
Along with Amfac Hawaii, the bankruptcy filing involves KDCW Inc., Amfac Holdings Corp., Ka'anapali Development Corp., Amfac Land Co. Ltd., Pioneer Mill Co. Ltd., The Lihue Plantation Co. Ltd., FHT Corp. and Ka'anapali Estates Coffee Inc.
Amfac's bankruptcy filing should not substantially affect Hawai'i's struggling economy, said Leroy Laney, a professor of finance at Hawai'i Pacific University.
"This isn't going to be any great blow to the economy. It's mostly a nostalgic thing," Laney said. "Institutionally in Hawai'i we used to think of the Big Five as the people who ran the place, as the pillars of the community. There are still some people around who think that way, so in some ways this is a landmark event."
Amfac began as H. Hackfeld Co., founded in 1849 by German sea captain Heinrich Hackfeld. After he returned to Germany and his interests were sold, the company was renamed American Factors, later Amfac Inc. It joined C. Brewer & Co., Theo Davies, Castle & Cooke and Alexander & Baldwin as the Islands' Big Five companies.
Hackfeld's company also spun out the Liberty House chain of department stores, a staple of life in the Islands. Liberty House went into bankruptcy and has since emerged under new ownership as Macy's.
In 1988 Chicago-based JMB Realty Corp. bought Amfac and its 55,000 acres of Hawai'i land for $900 million. The following year, Amfac/JMB Hawaii sold $385 million worth of certificates of land appreciation notes — COLAs — to help finance JMB Realty Corp.'s buyout of the former Amfac Inc.
The COLA investors did not get a stake in the company, but rather a promise to be repaid with interest and the possibility of more money if the company's land values rose.
Over the next decade, sugar operations began dying across Hawai'i.
"The company came up with all kinds of plans on how to make sugar work on Maui and Kaua'i over the last several years — reorganization plans and consolidation plans," said Amfac spokesman Jim Boersema. "It just never worked out."
Amfac Hawaii still owes $185 million for the COLAs and $140 million in other debt, Boersema said.
Last year it sold 17,000 acres of its former Lihue Plantation for about $25 million to Internet billionaire Steve Case, Hawai'i-born chairman of AOL-Time Warner.
Amfac still faces "an unmanageable debt," Boersema said. The company lost $51.8 million in 2000, compared with $19.9 million in 1999 and $41.7 million in 1998.
In just the three months ended Sept. 30, Amfac hemorrhaged nearly $32 million.
"It was inevitable," said Seymour Tublin, a marketing and finance consultant and former economic development specialist for the state Department of Agriculture. "They had been kind of doing the same old stuff and not really changing with the economy.
"A lot of the Big Five relied on the land always bailing them out. But with the economy being flat for 10 years, the land did not increase in value and wasn't as important anymore."
The company said yesterday it still hopes, after emerging from bankruptcy, to continue its Ka'anapali development plan, golf course operations and strategic land sales. Its companies that own the Waikele Golf Course on O'ahu and the two Royal Ka'anapali Golf Courses on Maui are not part of the bankruptcy filing, Amfac said.
Advertiser staff writer Andrew Gomes contributed to this report.
Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.
