BEFORE THE PUBLIC UTILITIES CO~ISSION OF THE STATE OF

Transcription

1 BEFORE THE PUBLIC UTILITIES CO~ISSION OF THE STATE OF HAWAII In Mtter Appliction ) HAWAIIAN TELCOM, INC. HAWAIIAN ) DOCKET NO TELCOM SERVICES COMPANY, INC. For Approvl Security Arrngements Relted Increse Senior Secured Revolvg Credit Fcility. ) DECISION AND ORDER -< I) ~ I ~ ~ >~-j

2 BEFORE THE PUBLIC UTILITIES CONMISSION OF THE STATE OF HAWAII In Mtter Appliction ) HAWAIIAN TELCOM, INC. HAWAIIAN ) Docket No TELCOM SERVICES COMPANY, INC. For Approvl Security Arrngements Relted Increse Senior Secured Revolvg Credit Fcility. DECISION AND ORDER By this Decision Order, denies HAWAIIAN TELCOM, INC. ( HTI ) HAWAIIAN TELCOM SERVICES COMPANY, INC. s ( HTSC ) (collectively, ) request for pprovl 0 llow Hwiin Telcom Communictionè, Inc. ( HT Communictions ) crese borrowg cpcity under existg senior secured revolvg credit fcility from $90 $150. I. Bckground A. Jot Appliction On Februry 27, 2008, jotly filed ir ppliction requestg pprovl crese ir existg security obligtions connection with n crese filed ir Appliction; Verifiction; Certificte Service (collectively, Appliction ) on Februry 27, 2008.

3 HT Communictions senior secured revolvg credit fcility from $90 $150 ( Proposed Fncg Arrngement ) ~2 The Appliction ws filed pursunt HRS ~ 269-7, , , s pplicble, HAR Title 6, Chpter 61, Subchpters 2, 6, 9, In Mrch 2005, conditionlly pproved merger trnsction or relted mtters descrid jot ppliction filed by Prdise MergerSub, Inc., now know s HT Communictions; GTE Corportion; Verizon Hwii Inc., now known s HTI; Bell Atlntic Communictions, Inc., db Verizon Long Distnce; Verizon Select Services Inc. (referred here s VH Merger ).~ Through Vii Merger trnsction, control over HTI cert relted ssets were trnsferred from vrious subsidiries Verizon Communictions Inc. HT Communictions prent compny, which 2 served copies Appliction on DIVISION OF CONSUMER ADVOCACY, DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS ( Advocte ), n ex ficio prty this proceedg pursunt Hwii Revised Sttutes ( HRS ) Hwii Admistrtive Rules ( liar ) Advocte re sole prties this proceedg. 3 1n re Prdise MergerSub, Inc., et l., Docket No , Decision Order No , filed on. Mrch 16, 2005 ( Decision Order No ). 2

4 re ultimtely controlled by TC Group L.L.C., db The Crlyle Group, Delwre limited libility compny. HTI, Hwii corportion, is wholly-owned subsidiry HT Communictions. Its prcipl plce busess is Honolulu, Hwii. HTI ws origlly chrtered 1883 under Kgdom Hwii, is public utility, s defed by HRS 269-1, subject regultion imder HRS Chpter 269. As cumnt locl exchnge crrier ( ILEC ) for Stte Hwii ( Stte ), HTI provides comprehensive slte locl trlata telecommunictions services on sttewide bsis. HTSC, wholly-owned subsidiry HT Communictions n ffilite HTI, is Delwre corportion. Its prcipl plce busess is Honolulu, Hwii. HTSC is uthorized trnsct busess Stte is telecommunictions crrier s defed by HRS Currently, HTSC is uthorized by provide resold fcilities-bsed telecommunictions services trstte resold wireless telecommunictions services (known s, commercil mobile rdio services or CMRS ) iii Stte. 4 Furr, HTSC 4 HTSC received certificte uthority ( COA ) provide resold telecommunictions services VH Merger docket (see Decision Order No t 58-60) lter received certificte registrtion provide CMRS Stte Decision Order No , filed on June 24, 2005, Docket No In Mrch 2008, HTSC received pprovl exp COA lso provide fcilitiesbsed telecommunictions services Stte. See In re Hwiin Telcom Services Compny, Inc., Docket No , Decision Order No , filed on Mrch 31,

5 provides terstte ll service on ntionwide bsis under purview Federl Communictions Commission. Recently, HTSC divested elf direcry publishg busess Proposed Fncg Arrngement In Decision Order No , while conditionlly pprovg Vii Merger trnsction, permitted cert fncg security rrngements entered for purpose consummtg Vii Merger. These rrngements cluded HT Communictions obtg senior secured revolvg credit fcility ( Revolvg Credit Fcility ). HT Communictions Revolvg Credit FcilIty re secured by, mong or thgs: (1) n unconditionl gurntee by HTI HTSC, (2) first priority pledge ll cpitl sck equity terests held by HTI HTSC, (3) perfected first priority security terests, mortgges on, substntilly ll tngible tngible ssets HTI HTSC (collectively, referred s Security Obligtions ) ~6 Presently, tl mount vilble (drwn plus undrwn) under HT Communictions Revolvg Credit Fcility is 5 In Novemr 2007, conditionlly pproved request sell HTSC s direcry publishg busess CED Invesr, Inc. ( Direcry Sle Docket ). See In re Hwiin Telcom Services, Inc. Hwiin Telcom, Inc., Docket No , Decision Order No , filed on Novemr 13, 2007 ( Decision Order No ). 6~ Appliction t

6 $90. 7 However, under HT Communictions lon greements, lit Communictions is uthorized one-time right crese mount vilble under Revolvg Credit Fcility $150 without: (1) dditionl lender pprovl; (2) enterg ny dditionl security obligtions; (3) executg ny dditionl lon documenttion. stte HT Communictions desires now crese Senior Revolvg Fcility from $90 $150 cquire property complete vrious construction reltg primry telephone service, service improvements dmistrtive support s outled HTI s Construction Budget filed with. on April 30, ssert ny remg portions revolvg le credit will reserved meet short--term needs repid with 12 months for unexpected cpitl expenditures or unforeseen events (e.g., nturl dissters, unexpected wer conditions, etc.). Accordg, [tlhis represents sfety cushion for serves s prudent mechnism 7 Accordg, prior Decision Order No pprovg VH Merger trnsction, it ws contemplted mount Revolvg Credit Fcility would $150. However, due restructurgs fncg mounts, Revolvg Credit Fcility limit ws ultimtely reduced $90, with option for HT Communictions crese threshold $200. In Jnury 2008, HT Communictions pid down drwn mounts credit fcility with proceeds from sle direcries, n effort sve on lon commitment fees on uncommitted (i.e., undrwn) portion Revolvg Credit Fcility, it requested cresed limit on fcility reduced $150. Additionl detils re set forth footnote 13 pge 8 Appliction. 8~ Appliction t 8. 5

7 public terest ccessibility ppropritely liquidity. ensure funds mnge ddress will hve unforeseen immedite events fncil opertions ~ expnsion trnsprent ssert existg nefit from proposed crese Security Obligtions cusmers will cusmers or would bility ssure m contued receipt qullty telecommunictions services t competitive prices. 0 B. Modifiction By letter ir Appliction sttg $150 ) April Proposed cresed cpcity would proposed subject cpcity will pprovl by Commission pproprite Pln, followg [my cresed 14, 2008, While Fncg subject requirement under still (i.e., from Security drws it modified seekg Arrngement, $90 deems Direcry Obligtions, future review filg ( Modified Request ). on /or necessry Debt Sle or Reduction Docket Modified Request is due 91d. t 8-9 (ternl quotes omitted). Id. t 10. See Modifiction Letter t 2. ( Modifiction Letter ). pprovl dted 6

8 ir recognition Appliction With regrds Debt t requests ( IRs ) mong this, letter Reduction uncertty dedle on, pln or cused by need for prior dditionl refer requestg ir 30, 2008,12 formtion. Mrch My requests 27, submit 2008, submittl time, 3 Advocte s formtion issued formtion on Mrch thgs, 25, plnned 2008, uses seekg for dditionl $60 cpcity. stte y re not ble Debt Reduction Pln t this plnned nlysis, time, re unble without submit completg ir identify long-term projects 2By letter dted Mrch 27, 2008, stted it ppered formtion conted Debt Reduction Pln (which ws n, fter n itil extension, due on My 30, 2008) my relevnt s delirtions regrdg requests set forth Appliction for which re seekg decision by My 21, Accordgly, requested consider submittg Debt Reduction Pln prior My 30, 2008 dedle, mde cler does not foresee concludg delirtions regrdg Appliction without review Debt Reduction Pln. 3On My 6, 2008, issued Order No Docket No ( Order No ) pprovg request for n dditionl extension time from My 30, 2008, June 30, 3008, submit ir Debt Reduction Pln, pursunt s decision order issued Direcry Sle Docket. dditionl extension request ws bsed on ir representtion y were process developg 5-yer strtegic pln ( Strtegic Pln ), which Debt Reduction Pln is component, required dditionl time complete. Accordgly, while pprovg request for dditionl time submit Debt Reduction Pln (i.e., until June 30, 2008), lso ordered submit Strtegic Pln concurrently with Debt Reduction Pln. 7

9 uses uncertty credit pprovl prudent cusmers. llow Accordg m cpcity. 4 cresed due lieve Proposed Fncg Arrngement would st exercise mrkets, However, terest, ir right ir pprovl would crese threshold without ny crementl lon origtion or or fees stte it revolvg s under is highly unlikely credit or or current credit mrkets. 5 could obt lon fcility on such fvorble terms lon documents given current stte In support y cite ir responses CA-IR-l CA-IR-2 filed on April 14, public Modified terest. Request, stte ir Accordg Modified Request, terests would under is ir protected by llowg n crese existg Revolvg Credit Fcility $150 under current fvorble terms lon while llowg Advocte time review cresed Debt Reduction Pln plnned uses cpcity Revolvg Credit Fcility once Debt Reduction Pln is filed. 4See Modifiction Letter t 2. 51d. necessry 8

10 C. Advocte s Position On My 13, Sttement Position 2008, Advocte ( CA s Position Sttement ) filed sttg it does not recommend pprovl Proposed Fncg Arrngement. However, should not concur with recommendtion is cled pprove Proposed Fncg Arrngement ccordnce with Advocte recommends such Modified Request, Commission grnted with bility rescd pprovl Debt Reduction resonble. 6 Pln /or Strtegic Pln pprovl if re not deemed The Advocte s position is bsed on following contentions. First, significnt leverged concerns cpitl Advocte regrdg structure. sttes existg The Advocte it hs highly notes Decision Order No expressed concerns regrdg proceedg dividends 65%, mong until 35% debt cpitl structure or trget thgs, equity is structure 16g s forth on Vii Merger pyments structure Accordgly, grvely troubled bout proposl Exhibit 3 on HTI s cpitl Appliction. 7 CA s Position Sttement t 19. 7Exhib confidentilly set cpitl chieved. stnt restricted consolidted Advocte sttes it is impcts durg 2, 3 4 Appliction were filed under Protective Order No , issued on 9

11 Moreover, grdg Advocte Applicnt s sttes bonds by rtg Advocte, terest, (b) contrry conditions 21696, down- due from opertions Accordg []llowg cur, now or [] reduction recent gencies cnnot ignored. 8 future, ny dditionl debt would thus: Order No. contued poor fncil performnce cresed competition debt (c) s () set not public Commission s forth tended Decision possibly viewed s negligence one s regulry responsibility public. 9 Second, Advocte clims terest coverge rtios shows erngs from opertions re currently expenses. projected Interest coverge sufficient rtio is result meet ir dividg erngs fore come txes by terest expense is used determe how esily compny cn py terest on outstg debt.2 The Advocte sttes compny s bility meet terest coverge is expenses 1.5 my or lower questionble rtio when low 1.0 terest dictes compny is hvg difficulty genertg necessry csh Mrch 7, 2008, this docket ( Protective Order ). Accordgly, mteril portions Advocte s nlysis regrdg cpitl structure referencg Exhibit 3 were filed subject Protective Order. See CA s Position Sttement t 6 8. ~ t 6-7 (cittion omitted). 9Id. t d.. 10

12 py terest obligtions. The Advocte sttes Exhibit 4 Appliction reflects projections dictg significnt deficiency bility generte sufficient csh meet terest obligtions for existg proposed debt. The Advocte contends ny pprovl llow crese ir obligtions would only serve debt relted terest excerbte current 2~. with present projected terest coverge rtios. Third, Advocte rgues dditionl debt or Revolvg Credit While funds for n ILEC s on-gog opertionl needs terest ILEC, sce by considerg Fcility is Advocte it would not understs ensure cresg entity with public hvg contued terest Revolvg debt levels ccess is public vibility funds Credit terest. should Fcility ssocited when terest The Advocte contends llowg n dditionl mortgge existg coverge rtios. pprovg requested crese HT Communictions Advocte disgrees such obted cur concern coverge rtios debt is k person similr llowg person obt, cnnot fford. Accordg Advocte, both situtions debr runs risk defultg on lon cretg criticl liquidity problem for debr s re overextended, cusmers. Assertg Advocte 211d. t 9. view 11 rgues llowg

13 crese ir Revolvg cuse y re currently.ble costs is not equity public terest Fcility simply do so without ny crementl terest given rtios. 22 coverge Advocte contends Credit opertionl current debt Moreover, shortflls, should funded through n equity fusion, if ny, s opposed debt, which would public terest. Fourth, hve not demonstrted Fcility. Appliction The need sttes crese drw dicte down Revolvg more Advocte sttes thn $90 Fcility Exhib 2 CredIt Revolvg Credit Accordg Advocte, need from Advocte do not until 3 project funds fter projection ssumes re will sufficient csh generted from opertions t time py for proposed cpitl expenditures fncg costs. The Advocte contends it is ssume re need drw down funds yond will current $90 Revolvg Credit Fcility t bout ctul HTI s Additionlly, 2008, $90 funds from sttes pproximtely $73 n AAA-rted money 22~ Advocte Revolvg Credit mrket 12 Fcility on formtion. needs. Mrch 25, current plced portfolio for t 11 (emphsis origl). from fncg projected threshold time without more opertions drew premture future use.

14 Thus, hve $73 vilble funds for future cpitl expenditures should re sufficient funds generted from opertions service costs. 23 (or project(s) Revolvg such purchse/vestment Furrmore, CA-IR-2 where property mke or bsed on py debt response y stte y re unble identify properties) cquired or built usg dditionl Credit Fcility, funds drwn from Advocte sttes it is not cler need dditionl fcility yond construction current $90 funds from threshold for utility cquisitions or engge construction projects. Fifth, pursue strtegic future projects, Advocte contends utility such plns identify property need cquisitions fundg should from should ny for or funds construction $73 drwn down plced n vestment portfolio fusion dditionl equity. ws or through The bsis for this recommendtion is equity fusion: (1) is consistent with s fdg should structure; (2) high (3) would coverge not rtio would elimte leverge hve chieve direct possibly resonble existg fncil impct ddress 23Id. t d. t on ny cpitl concerns ssocited regrdg liquidity ~24 existg risk; with terest concerns

15 Sixth, should Advocte s concerns not concur with resultg recommendtion, Advocte recommends pprovl request ccordnce with Modified Request s bility rescd conditioned on pprovl if Applicnt s Debt Reduction Pln or Strtegic Pln re not deemed resonble. In short, prudent Advocte contends it would only ny pproved crese Revolvg Credit Fcility rescded should ir Debt Reduction Pln or Strtegic Pln deemed unresonble uncceptble. Flly, Stte s only Advocte sttes HTI, s ILEC, bckbone for by uthorized Thus, is provider provision services telecommunictions competitive Advocte locl contends exchnge HTI services crriers. must rem fncilly strong order ensure contued opertions, HTI mt must hve telecommunictions systems. However, which The sufficient Advocte, would estblish progress Advocte meetg trck operte, funds, ILEC sttes creditble wrd not frstructure required should plce funds through t high Commission s computer ccordg dditionl debt, fncil risk. record repir, need shows first significnt trgeted cpitl structure fore g llowed enter dditionl debt d. t

16 Moreover, Advocte recommends view formtion presented Debt Reduction Strtegic through 17 Pln with cution. As set Advocte s Advocte contends, forth Position mong or thgs, on pges 15 Sttement, given pst, possibly, current system problems existed my still exist, re re questions regrdg ccurcy outputs or dt provided used develop Debt Reduction Pln Strtegic Pln. recent The Advocte lso sttes turnover strtegic senior executives termtion or deprture numr mngement employees my hve resulted - loss knowledge experience. ir fncils pper sce strtegic Moreover, opertionl mrket Advocte notes consistently uncert regrdg mterils previously filed hve lredy mterilly chnged contue extend due dte ir Debt Reduction Pln which ws origlly due on Jnury 12, D. Response On My 14, 2008, filed ir Sttement Response Division Advoccy s Sttement Position (, upon Response ). furr In ir Response, considertion, it specific pprovl under HRS does contend not pper ~ is required for HT Communictions exercise one-time right 15

17 crese borrowg Fcility from $90 Modified Request. obligtions cpcity They rgue under $150 Revolvg pursunt while HT Credit ir Communictions under Revolvg Credit Fcility or rrngements obligtions re re secured by ctully not Security triggered, Obligtions, or exped, lon se cover this dditionl cpcity unless or until this dditionl cpcity is drwn upon, which, 26 under Modified Request, would require seprte review pprovl under HRS ~ , thus, now contend pprovl is not required for HT Communictions exercise it option crese borrowg cpcity under Revolvg Credit Fcility from $90 $150 ( Approvl Anlysis ) In request. ir Now, Response, request, g modified by My 21, ir 2008, form m wher grees with ir Approvl Anlysis. does request Alterntively, not gree with Applicnt s decision order event Approvl by My Anlysis, 21, 2008, providg ny pprovls deemed necessry or pproprite. llow HT Communictions Revolvg Increse ) Credit. funds crese borrowg cpcity under Fcility $150 ( Proposed Cpcity Relted this, confirm cknowledge cnnot drwn ( debts not curred) on this cresed cpcity without seprte review /or pprovl 26~ Response t 3. 16

18 by Commission Additionlly, seek drws under HRS ~ confirm gree /or 269.~19.~27 y will not from cresed cpcity until t lest sometime followg s review Debt Reduction Pln. In response Advocte, cert stte concerns rised by Modified Request proposed by, clrified ir Response, will not impct cpitl structure, debt levels, or terest coverge rtios sce will not ctully drw down on cresed cpc-ity t this time. under Modified Request, ll Accordg, is g plnned or proposed t this time is for lit Communictions crese borrowg cpcity under revolvg credit fcility[.] 28 Moreover, sce would not llowed ctully drw down from cresed cpcity without seprte dditionl resonble review very pprovl, legitimte contend concerns rised by Advocte should not considered s prt stnt proposl. 271d. t d. t

19 E. Advocte s Supplement On My 14, 2008, Advocte filed Supplementl Sttement Position ( CA s Supplement ) requestg leve submit filg settg forth position on new proposl set forth In short, Advocte sttes it Response. disgrees with Approvl Anlysis. The Advocte contends under HRS ~ , public j.urisdiction must evidence prt utility s subject s seek prior Commission pprovl debtedness performnce utility would ssets The Advocte sttes encumr whole neàessry uthorized issue ny public or useful utility or ny service. 29 must consider utility s bility repy debt or risk loss ssets were pledged s security on debt when evlutg ppropriteness llowg utility enter long-term debt encumr ssets s security on debt. The Advocte rgues it. does not mtter wher funds re dwn, but nlysis must consider impct commitment enter utility s ssets. ny written notice debt pledge Moreover, Advocte contends crese mount funds vilble under Revolvg Credit Fcility is k commitment by 29~ CA s Supplement t 4. 18

20 enter [] execute debt strument for mount crese resultg correspondg crese mount encumbrnce public utility ssets. 3 Accordgly, proposl set forth Advocte ir sttes Response requires pprovl. In ddition, contention Advocte pprovl sttes would only required when tend ctully drw funds from cresed cpcity is consistent with ir not seekg pprovl on ech drw down from existg The existg prctice $90 Advocte should Revolvg reitertes deny Credit Fcility. recommendtion request sttes not swyed by clim nlysis should not focus on bility repy debt or ir fncil position t this time. II. Discussion The is conferred with regultion HRS Chpter mortgges, 3o~ ~ supervision ll public utilities dmistrtion 269.~ Specificlly, pprovl, disposes is, required or under fore encumrs, (emphsis origl). HRS HRS mong , public or prior utility thgs,

21 whole or ny prt property necessry performnce duties public. Specificlly, HRS sttes s follows: No public utility corportion shll sell, lese, ssign, mortgge, or orwise dispose or encumr whole or ny prt rod, le, plnt, system, or or property necessry or useful performnce duties public, or ny frnchise or permit, or ny right reunder, without first hvg secured from public utilities n order uthorizg it so do. Every such sle, lese, ssignment, mortgge, disposition, encumbrnce, merger, or consolidtion, mde or thn ccordnce with order shll void.... HRS (emphsis dded). Prior pprovl is lso required under HRS , fore public utility cn issue scks sck certifictes, pyble t HRS , bonds, notes periods or more thn evidences debtedness, one yer (2) issue. restricts purpose for which scks or evidences debtedness my issued : property; fter construction, completion, (1) cquisition extension, or improvement or ddition fcilities or service; (3) dischrge or for lwful refundg obligtions; (4) reimbursement moneys ctully expended for purposes noted bove. Furrmore, HRS 269-7() uthorizes exme condition every public utility cludg ll fncil trnsctions busess reltions with or persons, compnies, corportions.32 32Specificlly, HRS 269-7() sttes, followg: 20 relevnt prt,

22 At outset, notes mended ir itil request twice this proceedg, first Modifiction Letter April dted 14, Response filed on My 14, 2008, g Due time constrts volved lit Communictions exercise right Revolvg Credit crese borrowg cpcity under Fcility, llow for just efficient disposition mtters this docket, will fford cert liar leniency , with will procedurl ddress ir rules, pursunt mendments Appliction.33 In ddition, given bove, lso fds it resonble grnt Advocte s request submit Supplement. The public utilities... shll hve power exme condition ech public utility, mnner which it is operted with reference issunce by it scks bonds, disposition proceeds re, mount disposition come, ll fncil trnsctions, busess reltions with or persons, compnies, or corportions, complince with ll pplicble stte federl lws with provisions frnchise, chrter, rticles ssocition, if ny, clssifictions, rules, regultions, prctices, service, ll mtters every nture ffectg reltions trnsctions tween it... public or persons or corportions. HRS () 33For stnce, request, ir Response, for provide confirmtion regrdg is Approvl Anlysis is properly request for declrry rulg under Subchpter 16 HAR Chpter

23 A. Approvl Anlysis In Modified ir Response, Request (bifurcted tween ssert under crese Revolvg Credit Fcility from ctul drw down funds), specific pprovl under HRS ~ is not required for lit Communictions exercise one-time right crese borrowg cpcity under Revolvg Credit Fcility from $90 $150 sce cnnot drw down on cresed cpcity without seprte review or pprovl under HRS ~ (i.e., Applicnt s Approvl Anlysis). The disgrees. The requirements HRS ~ re cler: public utility must obt pprovl fore issug ny evidences debtedness would encumr whole or ny prt property (or ssets) necessry or useful performnce duties public, ny encumbrnce mde or thn ccordnce with n order would void. cse, The fds encumbrnce (or, pledge crese Security Obligtions) this is triggerg pot s opposed ctul drw down funds s terpreted by. In this stnce, encumbrnce will occur when lit Communictions exercises right crese borrowg $90 Obligtions borrowg cpcity under re $150 subject cpcity. Revolvg Credit Fcility from lit Throughout sce Communictions Security crese this proceedg mke 22

24 cler crese lit Communictions borrowg -cpcity under $150 Revolvg Accordgly, is Credit Fcility subject review from $90 Security pprovl Obligtions.34 Proposed Cpcity Increse is necessry under HRS ~ ~~ B. Proposed Cpcity Increse In ir issue Response, n order eir requested greeg with Approvl Anlysis, ddressed section bove, or decision order providg ny pprovls deemed necessry or pproprite llow lit Communictions under Revolvg $150 Credit (i.e., crese Fcility Proposed from borrowg cpcity $90 Cpcity Increse). Hvg reviewed request record estblished this proceedg, consistent with fds public terest request, under circumstnces, unresonble. In support ir request, contend it would gst public terest not llow crese cpcity Revolvg Credit Fcility t this time if it is needed t lter dte found by ~See Appliction t 1, 2, The Advocte See CA s Supplement t ; concurs 23 Modifiction with our Letter t ssessment.

25 public The estblished terest llow disgrees. this such Given proceedg, wher would drws our it review ppers future. highly record specultive fd it public terest llow ny drws from cresed cpcity under HRS ~ Moreover, cn only mke determtion bsed estblished record this docket not on future expecttions fncil conditions, specultive ssumptions. In this need proceedg, crese projections Appliction dicte threshold The would Mrch not 2008 set occur drw filed Revolvg forth drw down numr $73.8 n AAA-rted money mrket resources dditionl necessry. funds re vilble yond 2 $90 future $90 yers plcement for 3 se Fcility. Fcility Credit ~ond Revolvg Credit funds demonstrte Exhib downs until $73 from now. from portfolio use ensure dictes threshold my not 36 Additionlly, filed stisfy requirements HRS which restricts issunce ny form debtedness under sttute for cert purposes such s cquisition property improvement or ddition public utility s fciliti.es or service. 36~ response CA-IR filed

26 provide dequte support for ir request. For stnce, response CA-IR-2, stte y re not ble identify projects properties usg built Revolvg Credit Fcility. reiterte y re cquired or construction from In ir Modifiction Letter, y unble funds drwn identify long-term projects uses [R]evolvg [C]redit [F~cilitymy used for. 37 In ir Response, chrcterize concerns set forth Advocte s Position Sttement, which re summrized Section I.C bove, very resonble, shred by.38 legitimte, with mny In prticulr, The concurs concerns rticulted by Advocte. is concerned pper hve, not mde strides chieve trget cpitl structure rticulted by Decision Order No Nor borrowgs hve would would eventully ffect ir improve it. lieve, cpitl documents re currently Debt Reduction cresed how y Pln works Strtegic would llevite concerns progress se hve not en The Debt Reduction Pln ws itilly ~See Modifiction Letter t 2. structure ny The notes, however, filed with. 38~ how stte y hope Pln, which re g developed, lrgely mitigte m. expled Response t

27 required filed on Jnury 12, The formed it needed ir Debt Reduction Pln review Appliction this docket by letter dted Mrch 27, However, requested received two seprte extensions file Debt Reduction Pln which is now, with Applicnt s June 30, Strtegic Pln, scheduled long filed on 2008.~~ The dely filg Debt Reduction Pln is nor concern cuse it would hve llowed greter context propose retire ir nlyze cpitl existg debt request structure ny how dditionl debt with erngs from opertions. Moreover, pprovl direcry publishg busess ws sle lrgely bsed HTSC s on pledge, Direcry Sle Docket, utilize net proceeds from levels.40 sle py down lit Communictions existg debt In proceedg, contended sle ppliction proceeds existg debt would result less highly leverged compny cpitl structure Order No ~ congruent concerns with mitigte set forth s Decision request this docket ppers tent ir pledge py down 395ee Order No See Decision Order No See Appliction filed on My 11, Direcry Sle Docket t ,

28 existg debt levels nef derived from sle HTS C s direcry publishg busess. Given bove, rgument ir request for pprovl Proposed Cpcity Increse is public terest is, t st, questionble. Allowg pledge crese ir Security Obligtions ssocited with lit Communictions cresed borrowg Revolvg Credit Fcility, t this time, purported circumstnces, fvorble terms unresonble, cpcity under simply tke dvntge is, given consistent with current public terest. Bsed on foregog, request lit Communictions for concludes crese pprovl borrowg llow cpcity under Revolvg Credit Fcility from $90 $150 should denied. III. Orders THE COMMISSION ORDERS: 1. The Advocte s Supplement filed on My 14, 2008, 2. llow lit Communictions RevolvgCredit submit is grnted. request for pprovl crese borrowg cpcity under Fcility from $90 $150 is denied. request. 27

29 MAY DONE t Honolulu, Hwii PUBLIC UTILITIES COMMISSION OF THE STATE OF HAWAII ~#9 By : Crli P. Cliboso, Chirmn Jo E. Cole, Commissioner By: Leslie H. Kondo, Commissioner APPROVED AS TO FORM: J,i ~ookkim ~p~imission Counsel 2c~8-cc44eh

30 CERTIFICATE OF SERVICE The mil, foregog order postge prepid, ws served on properly dte ddressed filg by followg prties: CATHERINE P. AWAKTJNI EXECUTIVE DIRECTOR DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS DIVISION OF CONSUMER ADVOCACY P. 0. Box 541 Honolulu, HI ALAN M. OSHIMA, ESQ. JOEL K. MATStJNAGA HAWAIIAN TELCOM, INC. HAWAIIAN TELCOM SERVICES COMPANY, INC Bishop Street Honolulu, HI FRANCIS K. MCJKAI, ESQ. HAWAIIAN TELCOM, INC. HAWAIIAN TELCOM SERVICES COMPANY, INC Bishop Street Honolulu, HI KENT D. MORIHARA, ESQ. MICHAEL H. LAU, ESQ. KRIS N. NAKAGAWA, ESQ. SANDRA L. WILHIDE, ESQ. MORIHARA LAU & FONG LLP Dvies Pcific Center 841 Bishop Street, Suite 400 Honolulu, HI Outside Regulry Counsel for HAWAIIAN HAWAIIAN TELCOM SERVICES COMPANY, INC. TELCOM, INC.