Posted on: Friday, March 25, 2005
Carlyle, Verizon request extension
By Sean Hao
Advertiser Staff Writer
Verizon Hawaii and The Carlyle Group have asked the Public Utilities Commission for more time to review restrictions placed on Verizon's proposed $1.65 billion sale of the state's main telephone company to Carlyle.
The state PUC last week approved the sale of Verizon Hawaii to the investment group after a nine-month review process. At the same time, regulators imposed several new restrictions aimed at ensuring consumers benefit from the sale despite the risks of creating a phone company loaded with debt.
Those restrictions include requiring the investment group to kick in more cash, restricting dividends to debt repayment and preventing the sale of Verizon's print directory business without PUC approval. The motion, if approved, would give Carlyle and Verizon Hawaii until April 4 to ask the agency to clarify or reconsider its decision. Without an extension, the deadline for seeking reconsideration or clarification of the PUC decision likely would be Monday.
"We have requested additional time to review certain provisions of the PUC's order to assess their impact on the transaction," Carlyle and Verizon said in a joint statement. "Verizon and Carlyle continue to seek a timely and mutually satisfactory transfer of control of Verizon Hawaii to Carlyle."
The PUC's decision cleared the way for the Washington, D.C.-based Carlyle to proceed with the deal that's expected to net Verizon Communications Inc. more than $850 million, while tripling the debt of the local phone company from $427 million to $1.39 billion.
However, analysts have said the added conditions placed on the sale could kill the deal. If the transaction fails to go through, the future of Verizon Hawaii could remain uncertain for nine-months or longer, the time it would take a new potential buyer to receive PUC approval.
Carlyle contends the sale will return management of the phone company to Hawai'i while boosting local employment and customer service.
However, the state consumer advocate and the PUC have expressed concerns that the large debt load of Hawaiian Telcom, the proposed name of the new company, could increase the risk that the company could run into trouble if its financial targets were not met. A foreclosure by lenders under such a scenario could affect customer service and rates, along with employees' jobs.
Kris Nakagawa, chief legal counsel for the PUC, said the motion now needs the approval of at least two of the three PUC commissioners to take effect. No time frame was provided about when a decision would come.
Carlyle and Verizon already have agreed to other conditions placed on the sale including providing customers a $20.70 credit on their bills and not raising rates except under certain conditions.
Reach Sean Hao at 525-8093 or shao@honoluluadvertiser.com.
