The Public Utilities Commission has rejected a request by Hawaiian Telcom to increase its borrowing limit to $150 million from $90 million.

In issuing its decision yesterday, the PUC agreed with the state consumer advocate that to allow a debt-ridden company such as Hawaiian Telcom to incur additional debt would be "akin to allowing a person to obtain a mortgage that the person cannot afford." The PUC further stated that the utility's request to boost its credit line, based on "purported 'favorable terms,' is, given the current circumstances, unreasonable and inconsistent with the public interest."

In a statement yesterday, Hawaiian Telcom spokeswoman Ann Nishida said the PUC's ruling should not affect the company's operations.

"Hawaiian Telcom sought regulatory approval for this increase to preserve the additional borrowing ability, at attractive lending terms, should we have a need in the future to draw from the revolver," Nishida said. "Yesterday's ruling does not impact Hawaiian Telcom's existing financial liquidity."

Hawaiian Telcom submitted its request to the PUC in April 2007, seeking to increase its borrowing by $60 million under its existing senior secured revolving credit facility. The additional funds would be used to "acquire property and complete various construction relating to primary telephone service, service improvements and administrative support," according to the decision and order released by the PUC.

The extended credit, Hawaiian Telcom argued, would represent a "safety cushion" and serve as a "prudent mechanism in the public interest to ensure that ... (Hawaiian Telcom) will have immediate accessibility to funds to address unforeseen events," according to the decision.

But the consumer advocate argued that the recent decline in the value of Hawaiian Telcom's bonds because of its poor financial performance "cannot be ignored." The advocate also said that Hawaiian Telcom's interest coverage ratios show that earnings from operations are "insufficient to meet their expenses."

Hawaiian Telcom was founded in 1883 and is the state's largest telephone company. Since the Carlyle Group acquired the company from Verizon Communications in 2005, Hawaiian Telcom has lost thousands of customers and more than $200 million.