Posted on: Sunday, May 31, 2009
Hawaii Superferry files for bankruptcy
Company claims it’s unable to operate here, lists debts as much as $100 million
By Derrick DePledge
Advertiser Government Writer
Hawaii Superferry filed for bankruptcy protection yesterday, telling a Delaware court that a Hawai’i Supreme Court ruling caused the Alakai to cease operations in March and has sapped the company’s revenues.
Superferry and its parent company, HSF Holding Inc., filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Delaware. Superferry listed between $1 million and $10 million in assets and $50 million to $100 million in debts.
Superferry has just $1 million in cash and was facing a $2.9 million principal and interest payment on one of the ferry construction loans yesterday. The company listed fewer than 50 creditors, including the state of Hawai’i, and maintained it should not have to make payments on $40 million worth of state harbor improvements because the operating agreement with the state was voided by a Maui court.
Superferry told the bankruptcy court that it plans to liquidate assets and “wind up their business.” While sources close to Superferry say it is possible for a “white knight” investor to show interest in the Alakai and a sister catamaran, the Huakai, it would likely be for charter operations and not an immediate return to passenger, cargo and vehicle service in Hawai’i.
The two catamarans are docked in a Mobile, Ala., shipyard owned by J.F. Lehman & Co., the project’s main investor.
“As a direct result of the Hawai’i Supreme Court decision last March, Hawaii Superferry had to shut down operations. There has been no relief from that decision,” Superferry said in a statement. “With no ability to operate, the company has had no revenues, only ongoing expenses to maintain the vessels Alakai and Huakai, our second ship.
“Our recent objective was to charter the ships outside of Hawai’i, which would keep Hawaii Superferry operating at some capacity. Although there are potential charter opportunities around the world, they take time and haven’t materialized in time for the company to meet its required financial obligations. Our efforts to refinance and restructure the company for this interim period with additional investment have not been successful, as yet. Accordingly, a filing of Chapter 11 was an unavoidable next step.”
Rough going
The bankruptcy filing could mark an end to Superferry’s stormy history in Hawai’i.
While the state Supreme Court ruling in March was cited as the final blow, the company’s court filing shows that several factors undermined the ambitious plans for high-speed catamarans to connect the Islands.
Just as Superferry was planning its debut in August 2007, the state Supreme Court ruled that the Lingle administration was in error when it exempted the state harbor improvements for the project from environmental review.
Environmentalists, who had challenged the exemption, moved to block ferry service through a Maui court while protesters halted the catamaran on Kaua’i.
The state Legislature in a special session passed a law, signed by Gov. Linda Lingle, that allowed Superferry to operate while an environmental review was completed. But barge problems on Maui delayed the ferry’s immediate return to service.
Superferry argues that the court rulings and delay eroded public confidence in its reliability. Damage to the Alakai in dry dock in February 2008 led to another suspension of service.
Superferry maintains that it demonstrated “outstanding reliability,” with service between Honolulu and Maui between April 2008 and the second Supreme Court ruling in March. The court found that the law which allowed Superferry to operate during the environmental review was an unconstitutional special law written for a single company.
“However, by then, the damage to the debtors’ reputation had already been inflicted,” according to the filing.
Superferry also cited challenging economic conditions last year and in the first quarter of this year that led to lower-than-expected revenues. The recession reduced demand for ferry service among both tourists and local residents.
In addition, Superferry cited an “unprecedented spike” in fuel prices last summer that significantly raised operating expenses. The company said it could not pass the higher fuel prices on to customers because it was competing with airlines for interisland fares.
State caught short
Mike Formby, the deputy director of the state Department of Transportation’s harbors’ division, said he was disappointed to hear Superferry is liquidating assets and going out of business. The state is in the process of comp
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