HonFed and the great estate: with a financial boost from the Bishop estate, is the third-largest financial services company in Hawaii finally out of the woods?

HONFED AND THE GREAT ESTATE

WITH A FINANCIAL BOOST FROM THE BISHOP ESTATE, IS THE THIRD-LARGEST FINANCIAL SERVICES COMPANY IN HAWAII FINALLY OUT OF THE WOODS? How often do business proposals made half in jest end up in dead-serious negotiations? More often than you might think. Take, for

example, First Hawaiian Inc. Chairman, President and CEO Walter Dods Jr.'s off-the-cuff remark to former U.S. Treasury Secretary William Simon about buying First Interstate of Hawaii Inc. According to Dods, it was a casual comment, but it resulted in a binding agreement to purchase the bank's local operation for $140 million. Not long after the final numbers on that deal had been worked out, remarks by officials of H.F. Holdings, the parent company of Honfed Bank, made to trustees of the Bishop Estate led to intense negotiations concerning the organization's purchase of 23 percent of the state's third-largest financial institution, a deal representing $50 million.

But the deals have more in common than polite conversation. Another common thread running between Honfed and First Interstate is the ownership interest of WSGP International LP, the investment group led by Simon. Bishop Estate, in turn, also had previous ties to the Simon Group through its $15-million participation in the group's purchase of First Interstate in 1989. Prior to that deal, Simon had control of about 40 percent of First Interstate's island operation. "They (Smith, Barney, Harris Upham & Co., Honfed's investment bankers) half-jokingly told us, |Gee, since you got such a great deal from the First Interstate sale (to First Hawaiian), wouldn't you like to roll it over into Honfed?'" recalls Matsuo Takabuki, a Bishop Estate trustee. "Later, they approached us and asked if we would be interested in taking a piece of Honfed. So we told them if they were serious, let's take a look at the whole god-damned thing."

The "whole god-damned thing," in this case, represented the $50-million cash infusion by Hawaii's largest private estate to help Honfed meet new, tougher capital requirements established by Congress with the passage of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). The agreement was the latest in a sequence of events over the last four years intended to stabilize the fortunes of Honfed, the state's largest thrift.