From Big Five to big fizzle, the downward spiral of a business now known as Amfac Hawaii, LLC (Limited Liability Company) ended Wednesday when the company filed for federal bankruptcy protection. Once a dominant business in Hawai’i, and one of
From Big Five to big fizzle, the downward spiral of a business now known as Amfac Hawaii, LLC (Limited Liability Company) ended Wednesday when the company filed for federal bankruptcy protection.
Once a dominant business in Hawai’i, and one of a group of companies known as the Big Five because of their influence on business and politics on Kaua’i and throughout the islands, Amfac suffered $120 million in losses in Hawai’i agricultural operations since 1989, and still has $140 million in unsecured debt.
The original Amfac was named American Factors and formed after World War I when the assets of German-owned Hackfeld and Co. were taken over by the federal government.
It is the “unmanageable debt service obligations,” associated largely with certificates the company issued when it bought Amfac from its previous owners, and continuing losses in agricultural operations and in other areas, that made the filing necessary, said Gary Nikele, Amfac Hawaii president.
Once operator of Lihue Plantation Company and Kekaha Sugar Company, and owner of nearly 20,000 acres of land, Amfac over the years reduced its assets on Kaua’i to the former Lihue Plantation power plant along Haleko Road, some associated buildings, and mill sites it couldn’t even get rid of when it sold its 18,000-acre Lihue Plantation to Steve Case of America Online-Time Warner last year.
As recently as 1996, Amfac employed around 1,000 people statewide. Some 400 jobs were lost when Amfac Sugar Kauai ceased operations in November of 2000, closing the mill and field work Kekaha Sugar and Lihue Plantation.
The 135 current Amfac employees in the state, including around 30 at the former Lihue Plantation power plant, will keep their jobs during the bankruptcy reorganization, Nikele said.
The closing of Amfac Sugar Kauai and other entities greatly reduced overhead, but there was an estimated $20 million shutdown cost associated with the Kaua’i plantations that the sale of Lihue Plantation just about covered.
The Chapter 11 filing allows the company to deflect debt collectors and focus on running its remaining businesses in Hawai’i. Sister companies which own Waikele Golf Course on O’ahu and two Royal Kaanapali Golf Courses on Maui are not parties to this filing.
“The company and its subsidiaries will continue operations during bankruptcy, and expect to emerge from bankruptcy protection within several months,” Nikele said.
Around 30 people work at the former Lihue Plantation power plant, which burning mainly diesel oil generates around 15 percent of all electricity consumed on Kaua’i.
When Amfac operated sugar plantations, the power plant burned bagasse, a byproduct of the sugar harvesting process, saving diesel oil and propelling the island to the best percentage of renewable resources used to produce electricity in the state, around 40 percent.
Now, the rate is around 5 percent renewable, 95 percent fossil fuels. Amfac is scheduled to close the power plant at the end of this year, ending the employment for nearly all the remaining Amfac employees on Kaua’i.
The generation capacity is not needed by Kaua’i Electric after July 1 this year, when KE’s Lihu’e Energy Service Center in Kapaia begins generating electricity.
Though the company’s current financial problems are traced by Nikele to past sour performance by its Hawai’i agricultural operations, he made no apologies for staying in agriculture in the state longer than financially prudent.
“We attempted to make agricultural operations work in spite of insurmountable hurdles relating to commodity prices and high local operating costs,” he said.
“We knew how important agriculture was to Hawai’i’s economy and how vital it was to protect agriculture jobs in the islands. We continued operations as long as we could, but we just could not overcome regulated commodity prices and very high labor costs relative to our competitors in third-world countries,” he said.
Under a plan worked out with secured creditors, existing debt will be converted to equity, and the company will emerge from the reorganization with an improved balance sheet and cash flow, he said.
“We also intend to continue paying all normal wages and benefits to our employees during the bankruptcy proceedings,” he concluded.
Staff Writer Paul C. Curtis can be reached at mailto:pcurtis@pulitzer.net or 245-3681 (ext. 224).
