LodgeNet Interactive Corp. said it will file for bankruptcy protection under an agreement with affiliates of Colony Capital LLC, which will invest $60 million in the provider of on-demand movies to hotel rooms.
The Colony affiliates will become the Sioux Falls, South Dakota-based company’s controlling shareholder through an expedited bankruptcy process, LodgeNet said in a statement today. Los Angeles-based Colony will receive new common stock representing full ownership, according to the statement.
LodgeNet 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 the company’s filings. LodgeNet has been trying to expand in health care, and its eSUITE system was installed in 68 medical facilities at the end of 2011, according to an annual filing.
“Under Colony’s leadership, LodgeNet is poised to transform its business through renewed financial strength, the introduction of new and innovative products and services, and strengthened industry relationships,” LodgeNet Chairman Doug Bradbury said in the statement.
LodgeNet said it expects unsecured creditors will be paid in full at the end of the Chapter 11 process. A steering committee of lenders holding the company’s debt will support a five-year extension of its $346 million secured credit facility, according to the statement.
The agreement also calls for LodgeNet and DirecTV to operate as strategic partners within the hospitality and health- care markets, according to the statement. LodgeNet, which provides Internet access and other guest-paid entertainment in 1.5 million hotel rooms in the U.S., Canada and Mexico, said DirecTV will help it deliver new and improved services.
Colony, with $38 billion in assets under management, also has invested in Fairmont Raffles Hotels International, hotel operator Accor SA and Amanresorts International Pte, according to LodgeNet’s statement.
LodgeNet fell 35 percent to 5 cents at the close in New York. The shares have dropped from a closing high this year of $4.38 on April 24.
Aaron Syvertsen, an analyst at Sidoti & Co., expects the company to post a 2012 adjusted loss of 64 cents a share, according to data compiled by Bloomberg. LodgeNet’s adjusted loss for 2011 was 20 cents a share, according to Bloomberg data.
LodgeNet’s sales declined 21 percent to $421.3 million last year from a high of $533.9 million in 2008. The company reported that revenue through three quarters of 2012 declined 13 percent from a year earlier to $278.7 million.
Stifel Financial Corp.’s Miller Buckfire unit, FTI Consulting Inc. and Moorgate Securities LLC provided financial advice to LodgeNet. Weil, Gotshal & Manges LLP and Leonard, Street & Deinard were the company’s legal advisers.
Colony’s financial adviser was Guggenheim Securities LLC, and Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP and Sullivan & Cromwell LLP provided legal counsel.
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