The Work

December 2, 2008 2:46 PM

That Was Quick: Kirkland Lands Hawaiian Telcom Chapter 11

Posted by Zach Lowe

On Monday, Kirkland & Ellis announced that Jamie Sprayregen was leaving Goldman Sachs and returning to his former job as cohead of the firm's bankruptcy and restructuring group.

Later the same day, Hawaiian Telcom became the latest debt-saddled company to file for Chapter 11 protection and, in the process, tapped Kirkland as its lead bankruptcy counsel, according to court papers.

A Kirkland spokeswoman did not immediately respond to a message seeking the names of firm partners who would work with Hawaiian.

The company, which court filings show has about $1.35 billion in assets and $1.27 billion in liabilities, says it can stay afloat for the short term with $75 million in available cash, the Associated Press reports.

Most of the debt is linked to financing arrangements private equity firm The Carlyle Group used to acquire Hawaiian Telcom from Verizon for $1.6 billion in 2005. Carlyle ponied up $425 million in equity for the deal and financed the rest with debt, according to this nice wrap-up by the Wall Street Journal's Peter Lattman (the original author of the WSJ's Law Blog).

Heavy debt loads like that are killing companies recently purchased by private equity shops, the WSJ says. Of 109 bankruptcy filings this year by companies with at least $1 million in assets, about two-thirds--67--were either owned or recently spun off by their private equity owner, the WSJ says, citing research from Capital IQ.

Perhaps that's why Sprayregen made the move back to law from finance just two and a half years after jumping from Kirkland to Goldman. As he told the WSJ, "I feel like the next wave of corporate bankruptcies is just starting."

Hawaiian Telcom, meanwhile, named Klehr, Harrison, Harvey, Branzburg & Ellers as local bankruptcy counsel in Delaware, where the company is incorporated. 

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