Pago Pago, AMERICAN SAMOA — Last Friday, Nov 30, 2018, a joint application for transfer of De Facto (control of cable landing license) was filed with the Federal Communications Commission in Washington DC.

The transaction involves Hawaiki Submarine Cable USA LLC (licensee); HCL Limited Partnership (transferor); and Palisade Subsea Investments Pty Ltd. (transferee).

Collectively, the applicants are requesting FCC approval for the transfer of de facto control of Hawaiki Submarine Cable (HSC) USA from HCL Limited Partnership, to Palisade.

APPLICANTS

HSC USA is a Delaware limited liability company which owns and operates the Hawaiki System’s cable landing station in Oahu, Hawai’i, and it is involved in submarine cable installation, as well as operations and management of the Hawaiki system. It is a direct, wholly-owned subsidiary of Hawaiki Submarine Cable LP (HSC LP), a limited partnership organized under New Zealand laws which, in turn, is a direct, wholly-owned subsidiary of HCL LP (a New Zealand limited partnership).

HSC LP is a bandwidth supplier in the Pacific submarine cable market and 100% owner of the capacity and facilities of the main trunk of the Hawaiki System, excluding the spur to American Samoa, which is owned by American Samoa Telecommunications Authority (ASTCA).

Palisade is an affiliate of Palisade Investment Partners Limited, an Australia specialist infrastructure investment manager. The limited company predominantly focuses on investments in Australian infrastructure, including submarine cable systems.

FCC FILING

According to a copy of the filing received by Samoa News, construction of the Hawaiki Submarine Cable System (the “Hawaiki System”) started on March 31, 2016 and the Commission granted the required U.S. cable landing license on December 20, 2017.

The Hawaiki System — placed into service on July 20, 2018 — has five segments and currently lands in five locations: Sydney, Australia; Mangawhai Heads, New Zealand; Tafuna, American Samoa; Kapolei, Oahu, Hawai’i; and Pacific City, Oregon.

The filing specifically notes that "the transaction will have no effect on the landing points or the day-to-day operations of the Hawaiki System," and "the Hawaiki System is operating and will continue to operate on a private, non-common carrier basis."

The FCC filing points out that the main trunk of the Hawaiki System is 100 percent owned by HSC LP. "All of the capacity on the main trunk is owned by HCL LP and its affiliates. ASTCA owns the spur from the trunk branching unit to American Samoa and the corresponding landing station.

None of the other licensees (i.e., Tillamook Lightwave, ACS or DRFortress) owns any capacity on the Hawaiki System," and "the transaction will have no impact on ASTCA, Tillamook Lightwave, ACS or DRFortress."

The application notes that HSC LP is a foreign carrier in New Zealand where the Hawaiki System lands, and New Zealand is a member of the World Trade Organization. "With the exception of its affiliation with HCL LP, Palisade is not affiliated with a foreign carrier or any entity that owns or controls a cable landing station in any foreign country where the Hawaiki System lands."

Moreover, "no entity that owns more than 25 percent of Palisade controls a foreign carrier in any foreign country where the Hawaiki System lands; and no combination of foreign carriers or parties that control foreign carriers own, in the aggregate, more than 25 percent of Palisade."

TRANSACTION

Palisade and HCL LP have entered into binding agreements to become equity partners, with funds managed by Palisade Partners acquiring an equity ownership interest in HCL LP.

As a result, Palisade has acquired "a combination of redeemable preference and ordinary equity interests in HCL LP that equate to 30 percent of the voting rights in HCL LP. Specifically, Palisade holds 10 percent of the ordinary shares and 100 percent of the preferred shares in HCL LP. Palisade’s acquisition of minority equity interests in HCL LP does not, by itself, constitute a transfer of control under FCC rules."

PUBLIC INTEREST STATEMENT

According to the application, granting the transaction will save the public interest because "it will provide Licensee with access to additional financial and operational resources that will help strengthen the Hawaiki System’s position in the telecommunications marketplace."

Furthermore, "Palisade is managerially and financially well-qualified to complete the Transaction and has the experience and resources to support and enhance HSC USA’s operations. The equity partnership between HCL LP and Palisade will also enhance connectivity among the United States, Australia, New Zealand, and the Pacific Islands by strengthening HCL LP and its operating subsidiaries.

Moreover, "Applicants emphasize that the proposed Transaction will have no adverse operational implications for Hawaiki customers, and in no event will it result in the discontinuance, reduction, loss, or impairment of service to customers."

BACKGROUND

On Sept. 14, 2018, prior to the Nov. 30th FCC filing, Palisade Investment Partners bought into Hawaiki Cable. The two signed binding agreements to become equity partners, with Palisade  acquiring a significant ownership interest in the Hawaiki cable, according to content-technology.com

According to the report, "The Hawaiki cable was commissioned on 20 July 2018 and is the fastest and largest link between the United States, Australia and New Zealand, with over 43 Terabits of capacity."

Being carrier neutral, Hawaiki "will significantly enhance connectivity in Australia, New Zealand, the Pacific Islands and the United States. Its network design includes several branching units to expand to additional Pacific Island countries."

The binding agreement, according to the report, "will also allow Palisade and Hawaiki to jointly explore investment in future data infrastructure developments."

Palisade is acquiring the interest in Hawaiki on behalf of two direct investment mandate clients and Palisade’s Diversified Infrastructure Fund (PDIF).

The parties will be seeking required regulatory approvals in the United States.