TEXT-Moody's downgrades Hawaiian Telecom Comm to B3

(The following was released by the rating agency)

April 8 - Moody's Investors Service ("Moody's") has
downgraded the Corporate Family Rating of Hawaiian Telecom
Communications Inc., ("HI-Tel") to B3 from B2, and changed the
outlook for the company to negative from stable. In addition,
Moody's downgraded the company's probability of default rating
to PDR-Caa1 from PDR-B2. Please refer to the Credit Opinion
and/or the Loss Given Default Assessment (LGD) Report for
further details on the individual debt ratings.

The rating actions reflect the fact that the serious
systems problems that developed in 2006 unexpectedly extended
into a good part of 2007. Consequently, operating and financial
performance fell well short of expectations and, in Moody's
opinion, may have caused significant long-term damage to the
company's competitive position. In 2007, HI-Tel residential
access lines declined 11.0%, total lines fell 7.0% and
high-speed-data lines grew just 1.3%. Overall revenues fell by
almost 4.0%. In addition, the Hawaiian Public Utilities
Commission (PUC) continues its investigation into the company's
service quality and performance levels. Despite recent signs of
systems stabilization and improving functionality and the
efforts of a new management team to refocus the business and
reduce costs, Moody's believes that the company's credit
profile over the next 18 to 24 months will be more consistent
with a B3 rating.

The negative outlook reflects the challenges that the new
management team will have in restoring HI-Tel's operating
performance to levels that are consistent with industry
averages in light of declining revenues, access line losses,
and remaining issues related to fixing the information systems.
In Moody's view, absent a substantial turnaround in performance
or equity infusion the company faces a greater risk of some
form of a distressed debt exchange in the intermediate term. We
also note that HI-Tel currently has limited resources to
withstand additional earnings and cash flow weakness.

Moody's has taken the following ratings actions: Corporate
Family Rating --- Downgraded to B3, Outlook Negative
Probability-of-Default Rating - Downgraded to Caa1, from B2
SGL Rating - Affirmed SGL-3 $90 mm Senior Secured Revolving
Credit Facility due 2012 - Affirmed Ba3 (LGD2 - 11%), LGD
changed from LGD2 - 23% $860 mm Senior Secured Tranche C Term
Loan due 2014 - Affirmed Ba3 (LGD2 - 11%), LGD changed from
LGD2 - 23% $150 mm Floating Rate Senior Notes due 2013 -
Downgraded to Caa2 (LGD4 -56%), from B3 (LGD5 - 75%) $200 mm
9.75% Senior Notes due 2013 - Downgraded to Caa2 (LGD4 -56%),
from B3 (LGD5 - 75%) $150 mm 12.5% Senior Subordinated Notes
due 2015 - Downgraded to Caa3 (LGD5 -81%), from Caa1 (LGD6 -
93%)

The PDR downgrade reflects a heightened probability of
default based on the risk that if the company does not make
sufficient progress in improving its performance over the next
eighteen to twenty-four months, its cash needs could exceed its
balance sheet cash and its permitted debt capacity as governed
by its credit agreements. Hawaiian Telcom Communications, Inc.
is an incumbent telecommunications service provider servicing
approximately 560K access lines. The Company previously
operated as a division of Verizon Communications, Inc. and was
acquired by The Carlyle Group on May 2, 2005, in a $1.6 billion
leveraged buy-out. The company's headquarters are in Honolulu,
Hawaii. Copyright 2008,