Lodgenet files for bankruptcy, along with $60 million funding & new DirecTV deal

LodgeNet Interactive Corp. 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 12 months ended Sept. 30, according to court papers.

LodgeNet, based in Sioux Falls, South Dakota, provides interactive TV and Internet services to the hotel industry. The company 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, according to court papers.

“We anticipate being able to complete this process on an expedited basis,” Frank Elsenbast and James Naro, the company’s co-chief executive officers, said today in a statement, citing support from lenders and suppliers as well as “the solid commitment of Colony Capital and an expanded strategic partnership with DirecTV.” The company said it may complete its restructuring within 60 days.

DirecTV Partnership

The proposed restructuring agreement calls for LodgeNet and DirecTV, the largest U.S. satellite-TV operator, 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.

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 support the plan, according to a LodgeNet regulatory filing.

The group will support a multiyear extension of its $346 million secured credit facility, according to the statement. LodgeNet said it expects unsecured creditors to be paid in full at the end of the Chapter 11 process. The agreement won’t take effect unless the judge overseeing the company’s bankruptcy case approves.

Existing Lenders

LodgeNet plans to borrow as much as $15 million from some existing lenders to help fund operations as it restructures, according to court papers. The company said its business won’t be interrupted and obligations to customers will be fulfilled.

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 Dec. 31 statement.

Miller Buckfire & Co., FTI Consulting Inc. and Moorgate Securities LLC served as financial advisers to LodgeNet, according to the statement. Akin Gump Strauss Hauer & Feld LLP and CDG Group LLC advised the agent for the lenders.

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

Editor: Stephen Farr, Andrew Dunn. To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware, at [email protected]; Steven Church in Wilmington at [email protected]; Niamh Ring in New York at [email protected]. To contact the editor responsible for this story: John Pickering at [email protected].