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The Honolulu Advertiser
Posted on: Friday, March 20, 2009

Bankrupt Hawaiian Telcom plans to pay $6M in worker bonuses

By Rick Daysog
Advertiser Staff Writer

Hawaiian Telcom Inc., which filed for bankruptcy protection in December, is asking a federal judge to approve bonuses totaling about $6 million to its 1,400 employees.

But Gov. Linda Lingle called the bonuses "unconscionable," and said her administration will oppose them in court.

"Hawaiian Telcom is the critical communications backbone for our state, and its action to pay millions in bonuses puts the company in a precarious position that jeopardizes its long-term viability, as well as threatens Hawai'i's economic recovery," she said.

In a filing with the U.S. Bankruptcy Court yesterday, the state's largest phone company said its workers are eligible for the bonuses because the company achieved performance targets for revenue, cash flow and other measures last year.

"Our employees are key to our long-term success and our ability to emerge from Chapter 11, so I, and the rest of the board members, have determined that it is critical that we stand behind their accomplishments and honor our commitment to them," said Walter Dods, Hawaiian Telcom's chairman and the former head of First Hawaiian Bank.

Dods defended the payments, saying they don't involve a "dime of taxpayer money." He said the company is simply trying to fulfill obligations it made to employees even before it filed for bankruptcy.

"There's nothing unconscionable about it," Dods said.

"What is unconscionable is a person who makes a political issue when somebody does the right thing and abides by their contract," he said.

The company said CEO Eric Yeaman agreed to waive $609,000 in bonus payments that he's entitled to this year.

Lingle said, "The fact that company president and CEO Eric Yeaman himself turned down a bonus shows that he clearly recognized bonuses were wrong and counterproductive to Hawaiian Telcom's efforts to restructure its finances and operations. He could have and should have put an immediate stop to this outrageous action."

Six of the company's senior managers also have agreed to defer half of any awards they receive until after Hawaiian Telcom emerges from bankruptcy protection.

The senior managers as a group are entitled to about $420,000 in bonuses, or an average of about $70,000 each.

Nearly $3.6 million of the bonus money is intended for non- senior management employees.

Hawaiian Telcom said its unionized employees qualify for about $2 million in incentive pay under the terms of their collective bargaining agreement signed in October.

"We commend the company management for working on behalf of the union employees and living up to 100 percent of the terms required by the collective bargaining agreement," said Scot Long, business manager for the International Brotherhood of Electrical Workers Local 1357.

Founded in 1883, Hawaiian Telcom has about 1,400 workers and annual operating revenues of about $500 million.

The company filed for Chapter 11 bankruptcy reorganization last year due to its heavy debt load and heated competition from wireless and other competitors.

Hawaiian Telcom's financial woes came after Washington, D.C.-based The Carlyle Group purchased the local carrier in 2005 for more than $1.6 billion.

Hawaiian Telcom said it initially wanted to pay $8 million in bonuses but reduced the figure after discussions with the company's bank lenders.

U.S. Bankruptcy Judge Lloyd King has scheduled an April 16 hearing on the issue.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.