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Hawaiian Telcom is the most recent private equity portfolio company to fail. UNI Global Union has been warning affiliates to expect that many more will follow. UNI already has an increasing list of telecom companies that have suffered under private equity investment. This is not a marriage of success for telecom companies, their workers or the communities where the companies operate.



Hawaiian Telcom, TDC Denmark, BCE Canada, Deutsche Telecom are all companies that have been involved with private equity. The experience for these firms has been different however the end result is always a poor one for the company and its workers. Now one has gone into bankruptcy.



Carlyle Group is the latest firm to take a telecom company down with Hawaiian Telcom. It has claimed to have put an injection of funds into the firm but in the end has been unable to turn it around.



“Carlyle offered to invest more equity before the bankruptcy filing, but the debt holders who now own the company declined that offer” (FT Hawaiian Telcom filing highlights private equity 02/12/08)



This raises major concerns for the future of private equity portfolio companies in any industry. To ‘aid or bail’ is a question for private equity firms to try to determine, but the consequences of their decision are far reaching. Not only are the jobs of workers in these companies uncertain, but also the retirement saving of workers who’s pension funds are invested in private equity. UNI has been appealing to pension funds investing in private equity to engage with the firms and ask questions about their investment strategy.



“The telecoms group's bankruptcy illustrates one of the trickiest issues facing private equity firms as they navigate the economic slowdown. The firms face the fraught decision of whether to recapitalise the ailing companies they acquired and, if so, whether it makes more sense to invest more equity or debt….But when a company reaches the so-called zone of insolvency, it becomes much harder to determine whether investing more money in a company preserves the value of the equity or means throwing good money after bad.” (FT, ‘Hawaiian Telcom filing highlights private equity’ 02/12/08)



UNI urges affiliates to engage with private equity firms to consider the workers and communities when making crucial decisions on the future of portfolio companies.

"We will see many more private equity firms walking away," one distressed debt manager predicted. "Because they can never exit at multiples higher than what they paid." (FT Hawaiian Telcom filing highlights private equity 02/12/08)



To read more: http://www.ft.com/cms/s/0/19f4bf9a-c011-11dd-9222-0000779fd18c.html