LodgeNet Interactive Files for Bankruptcy Protection

By Dawn McCarty, Steven Church & Niamh Ring – Jan 28, 2013 12:00 AM ET

LodgeNet Interactive Corp. (LNET) filed for bankruptcy protection with plans to be taken over by affiliates of Colony Capital LLC, which will invest $60 million and work with DirecTV to provide on-demand movies to hotel rooms.

LodgeNet had about $292 million in consolidated assets and about $449 million in consolidated debt as of Sept. 30, 2012, according to court papers filed yesterday in U.S. Bankruptcy Court in New York. LodgeNet reported consolidated revenue of about $379 million for the twelve months ending Sept. 30, court papers show.

LodgeNet, based in Sioux Falls, South Dakota, hasn’t posted an annual profit since 2006. Last year, 95 percent of its revenue came from the hotel industry, with Hilton Worldwide and Marriott International Inc. accounting for about a third of sales, according to company filings. LodgeNet has been trying to expand in health care, and its eSUITE system was installed in 82 medical facilities representing about 18,600 beds, court papers show.

The proposed restructuring agreement calls for LodgeNet and DirecTV (DTV) to operate as strategic partners within the hospitality and health-care markets, according to the statement. More than 56 percent of the pre-petition lenders and 73 percent of the total amount of debt under the agreement have voted to accept the plan, according to court papers.

Controlling Shareholder

Under the plan, Los Angeles-based Colony would become the company’s controlling shareholder, LodgeNet said in a Dec. 31 statement. A committee of lenders, which controls about 44 percent of the company’s existing credit facility, agreed to amend the terms of their loan and to support the plan, according to a LodgeNet regulatory filing.

The group will support a five-year extension of its $346 million secured credit facility, according to the statement. LodgeNet said it expects unsecured creditors will be paid in full at the end of the Chapter 11 process.

The agreement won’t be effective unless the judge overseeing the company’s bankruptcy case approves.

Colony, with $38 billion in assets under management, also has invested in Fairmont Raffles Hotels International, hotel operator Accor SA (AC) and Amanresorts International Pte, according to LodgeNet’s statement.

The bankruptcy case is In re LodgeNet Interactive Corp., 13-10238, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware atdmccarty@bloomberg.net; Steven Church in Wilmington, Delaware atschurch3@bloomberg.net; Niamh Ring in New York at nring@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net