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Plan of Reorganization Questions and Answers
1. What is a Plan of Reorganization?
The Plan of Reorganization (the “Plan”) is the Company’s formal plan setting forth in detail how the claims of each class of creditors and interest holders will be treated. The Plan further establishes the ownership and capital structure for the Company upon its emergence from bankruptcy. The Plan must be voted on and approved by a certain percentage of creditors, then be approved or “confirmed” by the Bankruptcy Court and all necessary regulatory approvals must have been received in order to become effective.
2. What is a Disclosure Statement?
The Disclosure Statement is a document that is presented to the Bankruptcy Court, and ultimately to creditors, that discloses the terms of the Debtor’s Plan of Reorganization, as well as adequate information about the Company and other matters so that holders of claims against or interests in the Company can make an informed decision as to whether to vote for or against the Plan.
3. Does this mean the Company is out of Chapter 11?
No. The Company will continue to operate under Chapter 11 until the Plan is voted on by creditors and interest holders, and then approved by the Bankruptcy Court. The Plan does not become effective until all necessary regulatory approvals having been received.
4. What are the next steps?
A hearing to approve the Disclosure Statement and the form of ballots has been scheduled for July 23, 2009. Once the Court approves the Disclosure Statement and the ballots, the Company will be able to solicit votes in favor of the Plan. The solicitation process entails mailing copies of the Disclosure Statement, the Plan and a ballot to each creditor entitled to vote to accept or reject the Plan. After the ballots are collected and tallied, the Court will hold a confirmation hearing at which it will determine whether or not the Plan should be confirmed. Once the Plan is confirmed by the Court, the Plan will not be effective until the Company obtains any necessary regulatory approvals. Under the current provisions of the Plan, the senior secured creditors will own substantially all of the equity of the reorganized HT, which means a change of control, i.e., a change of ownership. As the Plan establishes new ownership, the PUC is entitled to review the new ownership and capital structure.
5. Does the PUC have to approve the Plan? Why?
Yes. Under the current provisions of the Plan, the senior secured creditors will own substantially all of the equity of the reorganized HT, which means a change of control, i.e., a change of ownership. As the Plan establishes new ownership, the PUC is entitled to review the new ownership and capital structure.
6. How long will the Bankruptcy Court confirmation, the PUC approval process, and our eventual exit from Chapter 11 take?
The Company continues to make good progress with its restructuring efforts. There are no specific minimum time periods associated with the Bankruptcy Court or PUC approval process, so it’s not possible to put an exact timeline on exiting from Chapter 11, but our goal remains to work through the process as quickly as possible.
7. What are the details of the Plan?
Key proposed provisions of the plan are as follows: At emergence approximately $1.15 billion of HT’s debt is being converted into $300 million of new debt and equity valued at $160 million. The senior secured creditors will own the equity of the reorganized HT, so the secured lenders will be our new owners.
8. Will there be a new senior management team since the banks will own HT?
The Company intends to maintain the current senior management team.
9. Will Carlyle be part of the reorganized Company?
Carlyle has offered to inject additional capital into HT. HT has elected to proceed on a reorganization path that provides a majority equity ownership to the existing lending group. Until the Plan is accepted by the Court, Carlyle's role is status quo. If the Plan becomes effective, Carlyle's ongoing involvement will terminate.
10. Will I be able to vote on the Plan of Reorganization?
Yes, if you have an outstanding claim you will receive a ballot and instructions once the Disclosure Statement has been approved by the Bankruptcy Court.
11. When will my claims be paid?
Payments of claims are made once the Plan of Reorganization has been confirmed by the Bankruptcy Court and all necessary regulatory approvals have been received.
12. How much will I get on the dollar?
Holders of Allowed General Unsecured Claims (except those claimants whose claims are assumed by reorganized HT, as applicable, in its sole and absolute discretion) shall receive cash on the effective date in an amount equal to a percentage of each such holder’s General Unsecured Claim. In no event shall the aggregate amount of such cash payments exceed $500,000.
13. What is the Unsecured Claims Fund and how much money is in it?
The Unsecured Claims Fund is cash in an aggregate amount equal to the value of the Unencumbered Assets, which value shall not exceed $36 million, as determined by the Bankruptcy Court or as otherwise agreed upon by the Debtors, the Senior Secured Parties and the Creditors’ Committee less (a) the amount of Allowed Administrative Claims, Professional Fee Claims, Priority Tax Claims and Priority Non-Tax Claims and (b) an amount equal to the value of the New Warrants and Subscription Rights offered to holders of Senior Notes Claims pursuant to the Plan, provided, however, that the Unsecured Claims Fund shall not exceed $500,000.
Bankruptcy Questions and Answers
1. When will I be paid?
Unfortunately, federal law prohibits payment for goods and services received before the December 1, 2008 filing date except pursuant to a Plan of Reorganization that is accepted by creditors and approved by the Court.
Goods and services received after the filing date can and will be paid for in the ordinary course of business. In fact, the Bankruptcy Code gives priority status to such payments. This means that you will receive payment for post-petition goods and services on the same terms as existed when we filed.
2. How do I make sure I get paid under the terms of a Plan of Reorganization?
Early in the bankruptcy case, Hawaiian Telcom will file a schedule of all known creditors and the amount Hawaiian Telcom believes each creditor is owed. If you appear on the schedules and agree with the scheduled claim amount, you do not need to do anything and your claim will be paid under the terms of the plan. If you do not appear on the schedules, or if you disagree with the scheduled amount of your claim, then you must submit a claim. You will receive a claim notice in the mail in the coming weeks with instructions from the court about how to submit a claim.
The Court will eventually set a deadline for all claims to be filed. This deadline is known as the Bar Date. You will receive notice of this deadline once it is set. This is not legal advice and you may want to consult an attorney. If the Company determines you have a valid claim, your claim will be treated as described in the Plan of Reorganization. No plan has been filed or approved by the Court at this time, so we cannot say how creditors will be treated.
3. Do I need an attorney to file a claim?
You are not required to hire an attorney to file a claim but you may choose to do so.
4. What if I have an uncashed check from Hawaiian Telcom for work performed
before December 1, 2008?
Unfortunately, federal law requires the Company to cancel any checks for pre-petition goods and services that have not been cashed or deposited by the December 1, 2008 filing date unless the check relates to a claim that the Company has received court authority to pay. If your check is cancelled, you may have to file a claim unless your claim amount is properly identified by the Company on schedules that will be filed with the Court. You will receive instructions about whether and how to file a claim in the coming weeks. We sincerely regret any hardship this may cause.
5. Can a supplier re-submit past invoices and get paid for them now?
No, the provisions of the U.S. Bankruptcy Code prohibit that, and filing for protection under Chapter 11 automatically triggers a halt or “Automatic Stay.” This bars, among other things, all collection actions against Hawaiian Telcom for monies past due.
6. Will I be paid for work performed or services provided after the filing date?
Goods and services provided to the Company from the filing date forward will be paid for in the ordinary course. In fact, the Bankruptcy Code gives priority status to such payments. This means that you will receive payment for post-petition goods and services on the same terms as existed when we filed.
7. What if I wait to submit an invoice until after the filing date?
Goods and services provided before the filing date will be considered pre-petition and are subject to the “Automatic Stay” that is triggered by the Chapter 11, regardless of when you submit your invoice. Waiting to submit an invoice until after the filing date will not allow you to be paid for the work performed pre-petition.
8. Why should I/my company continue to do business with Hawaiian Telcom?
Because all goods and services provided after the filing date are treated with priority status and will be paid in full as required by the U.S. Bankruptcy Code. We view our suppliers and vendors as partners and while we apologize for any hardship this may cause, we hope to be able to work with you for many years to come. Moreover, pre-petition claims will be resolved through the Company’s Plan of Reorganization.
9. Given the uncertainty of the situation, I want to renegotiate my terms with Hawaiian Telcom.
Due to the protection the courts provide to suppliers post-petition, we are an even better credit risk today. We cannot afford to pay more for goods and/or services. Our ability to purchase from you on favorable terms and at competitive prices is critical. We expect in the months and years ahead to be as good a customer to you as we have been in the past. We hope you will continue to work with us.
10. I want my merchandise back, and I’m sending someone to get it.
Taking back goods from a company that has filed Chapter 11 is against the law. Check with your legal counsel before taking any such action.
11. Who should my lawyer contact if he/she has questions for counsel?
Brian Lennon, Esq.
Kirkland and Ellis, LLP
Citigroup Center
153 East 53rd Street
New York, NY 10022
(212) 446-4800 ph
(212) 446-4900 fax
12. How do I file a proof of claim?
A complete list of creditors, including your company, is being prepared by our attorneys. A noticing agent will send official notice of the filing and the first creditors’ meeting to all listed creditors. Sometime after the first creditors’ meeting, the Court will set a deadline known as the Bar Date for filing proofs of claim and you will be mailed a notice telling you of the deadline, along with a claim form. All claims will be filed with Kurtzman Carson Consultants. If you wish to file a proof of claim sooner, please contact them at (866) 381-9100, or visit the reorganization section of our website, www.hawaiiantel.com and click on “Court Documents” for a proof of claim form and filing information.
13. As an unsecured creditor, who is looking after my interests?
The U.S. Trustee, an arm of the Justice Department, will most likely appoint a committee of unsecured creditors to oversee the interests of all unsecured creditors in the case. The U.S. Trustee will send out notice of the meeting to form the committee to all unsecured creditors. That organizational meeting typically takes place within the first two weeks of the case.
General Questions & Answers
1. What is Chapter 11?
First and foremost it does NOT mean that the Company is going out of business. Chapter 11 is a legal mechanism for court-supervised reorganization or restructuring of a company's obligations. Chapter 11 provides a way for our Company to address its financial challenges, while continuing day-to-day operations.
In other words, we filed for Chapter 11 to strengthen our business by addressing our current financial situation.
2. Why did you file for Chapter 11?
Hawaiian Telcom took this action to reorganize its business and strengthen its balance sheet by reducing its debt so that the Company can compete more effectively in the ever-changing communications industry. Hawaiian Telcom is determined to maintain its competitiveness in the market, and a key to accomplishing that goal is restructuring the balance sheet.
3. Do you have enough money to stay in business?
Yes, as of November 30, the Company had approximately $75 million of cash on hand.
4. Does this mean you are going out of business?
Absolutely not. We filed for Chapter 11 to strengthen our business by addressing our current financial situation.
5. What happens during Chapter 11?
The Chapter 11 filing triggers a "stay," which generally prevents anyone from collecting debts owed by the company before the petition date, such as loan payments it would ordinarily make to creditors and bondholders, and payments to suppliers for goods or services received before the filing.
Chapter 11 permits, and in fact encourages, daily operations to continue. We will continue to serve our customers, pay our employees, and pay for goods and services purchased after the filing date in the ordinary course of business.
While operating the business, management will work with the Company’s creditors to finalize a plan to restructure its debt. The restructuring plan is called a plan of reorganization. When the plan is accepted by the creditors and approved by the Court, it is said to be confirmed and Hawaiian Telcom emerges from Chapter 11 as a reorganized company.
6. How long will the Company be in Chapter 11?
At this juncture it is too early to say. However, our goal is to work through this as quickly as possible.
7. Which entities are included in the filing?
Hawaiian Telcom Communications, Inc.; Hawaiian Telcom Holdco, Inc.; Hawaiian Telcom, Inc.; Hawaiian Telcom Services Company, Inc.; Hawaiian Telcom IP Service Delivery Investment, LLC; Hawaiian Telcom IP Service Delivery Research, LLC; Hawaiian Telcom IP Video Investment, LLC; and Hawaiian Telcom IP Video Research, LLC.
8. Do companies ever emerge from Chapter 11?
Yes. Many companies, including Hawaiian Airlines, United Airlines, Macy’s, Toys ‘R Us, K-Mart, and many others, have successfully reorganized under Chapter 11.
9. Who will run the company? Will management remain in place?
One of the key aspects of Chapter 11 is that management remains in place. Our management remains committed to the future success of the Company.
10. How can I get a copy of the petitions?
Copies of the Chapter 11 petitions and other documents filed with the Court will be available shortly after the filing at www.hawaiiantel.com. The petitions are also accessible at the Court’s website, www.deb.uscourts.gov, through an account obtained from Pacer Service Center at (800) 676-6856.
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