Musings: Holding the Bag

The moisture-filled air had a sparkly quality to it when Koko and I went out walking this morning, just in time to see the sun rise and turn that sparkle pink-gold. But the most stunning sight of all was Waialeale, which kept me mesmerized, standing there all agog, as it went through a light-induced metamorphosis that took it, within the course of several minutes, from flat blue to silver-green to a mosaic of moss green, brown and deep blue, all softened by a veneer of yellow.

As we all watched, the Hawaii Superferry went through its own dramatic transformation in a process that was not nearly so swift or pretty. Initially billed as a state-of-the art, affordable alternative for inter-island travelers and goods, it sharply divided the islands, provoked protests and a “unified command” response, had our governor and legislators doing back flips to please it, generated god knows how many reams of legal documents and finally was fully repudiated by the courts for its bold and brazen attempt to circumvent the state’s environmental laws. Yesterday, in the latest chapter of a saga that’s not quite over yet, it filed for Chapter 11 in the U.S. Bankruptcy Court in Delaware.

It’s really no surprise that it’s come to this. When the Hawaii Supreme Court issued its final ruling that shut the big boat down, both the state and company officials kept up the charade that it might be back when the EIS was pau.

I don’t imagine many thinking people believed that — which raises the question of whether DOT’s Mike Formby is a dunce or aspiring actor. We already know that Sen. Sam Slom, who continues to maintain that the court’s decisions were wrong, is a complete idiot.

Although HSF executives like to blame the Court and environmental activists for its financial woes, in truth, the Court’s decision was a way out for a company that never had a viable business model as a passenger ferry and was losing money on a daily basis in the Islands.

According to an Advertiser article, HSF just couldn’t scrape together enough work elsewhere in time to pay its bills:

"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."

Doesn’t it strike you as a bit odd that it wasn’t preparing for such a contingency when its case was before the Hawaii Supreme Court — a panel that had previously rejected its claim that an EIS wasn’t needed — instead of waiting until the decision was rendered?

Unless, of course, bankruptcy better serves the company’s purposes. The Maritime Association, which originally secured loans of $143 million for the venture, holds first mortgage on the boats. HSF also owes $22.9 million to Austal USA, which built the two ferries — and won a lucrative contract to build JHSVs in the process — and holds a second mortgage. Leasing the vessels to the military would work well for those two entities and primary investor JF Lehman, who currently has both boats in his Mobile, Ala., shipyard, while leaving the State of Hawaii, smaller investors and service providers holding the bag.

As I outlined in a previous post and Maui Tomorrow detailed in a letter to the Maui News, the state is paying dearly for its decision to jump on board the Superferry. (Hmmm, I wonder if the state will end up having all the court-ordered legal costs.)

State auditor Marion Higa in her official audit of the Superferry boondoggle, hinted at the unfortunate and expensive outcome of the state's tumultuous affair with the ferry:

In the end, the state may have compromised its environmental policy in favor of a private company's internal deadline," state auditor Marion Higa concluded. "It remains to be seen whether these decisions will cost the state more than its environmental policy."

So when the final costs are tallied, let's not forget who answered the door and said "come in" when the snake oil salesmen came calling.