Bankruptcy for Hawaii Superferry

Operator to pursue bankruptcy protection just two months after being forced to leave islands by court decision.

The innovative but troubled Hawaii Superferry is filing for bankruptcy in the choppy wake of a Hawaii state Supreme Court ruling that prevented it from continuing to operate there. The operators of the only passenger ferry operating in these waters - and one which promised to make interisland travel more affordable for everyday Hawaii residents - said in a statement that the expenses of maintaining its two vessels have weighed down the company because it doesn't have any revenues.

Just two months after being effectively banned from Hawaii waters until a required environmental study was completed, the ferry’s operator looked to charter the U.S.-flag, Germanischer Lloyd-classed vessel elsewhere. In the end, the company’s financial obligations could not wait for that to happen.

In Saturday’s official statement, the Superferry’s management said, “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.”

The Superferry's Alakai began service in 2007 in the face of stiff resistance from activists who claimed that the ferry would adversely impact the local environment in a number of ways. The only passenger-vehicle transportation link between Oahu and Maui, capable of transporting as many as 200 vehicles and 800 passengers, was allowed to operate when the state Transportation Department exempted the Superferry from an environmental review in February 2005. On March 16th, however, the state Supreme Court ruled that a state law allowing the company to operate while an environmental study was being conducted was unconstitutional.

The Alakai has since departed Hawaii, on its way to Mobile, AL, where it was built. The delivery of a second ferry has been suspended because of prevailing economic conditions and the ongoing environmental review, which could take more than a year to finish. Hence, the reinstatement of the service is unlikely.

"Hawaii Superferry would like to thank the legions of people and businesses who have supported us," the Superferry said. "The overwhelming majority of people around the state view Hawaii Superferry as a much-needed and wanted transportation service." The idea, first dreamed up in July of 2001 by a local engineer, and brought to life in 2005 by John F. Lehman, former secretary of the Navy and member of the 9/11 Commission, is now apparently just another Title XI casualty.

In addition to as much as $85 million in equity capital provided through the private equity firm J.F. Lehman & Co., the federal Maritime Administration (MARAD) also provided a guaranteed $136 million Title XI federal loan, and the state of Hawaii has also kicked in tens of millions more to jumpstart the project.