Carlyle's Bet on Telecom in Hawaii Ends Badly

Hawaiian Telcom Communications filed for bankruptcy protection Monday, a black eye for buyout firm Carlyle Group and another blow to the reeling world of private-equity investing. Carlyle bought Hawaii's largest telephone carrier from Verizon in 2005 for $1.6 billion, putting up $425 million in equity and using debt to finance the rest. Carlyle stocked the board with a team of telecom experts, including William Kennard, former chairman of the Federal Communications Commission, and former Nextel Communications Inc. Chief Executive Daniel Akerson. But the private-equity firm faced problems from the start. State utility regulators delayed the deal's closing. And billing and customer-service issues plagued Hawaiian Telcom as it created back-office systems from scratch. That spurred customers to drop service for wireless and cable providers.