LodgeNet Interactive Corp. (LNET) said Monday it will file for Chapter 11 bankruptcy as per a deal with affiliates of Colony Capital LLC that will invest $60 million in the company.
The move will see Colony Capital gain control over LodgeNet and receive new common stock representing full ownership in the company.
LodgeNet, a provider of on-demand movies to hotels, also said it has received support from a steering committee of its lenders holding its debt for a multi-year extension of its existing $346 million secured credit facility.
LodgNet said Colony Capital has also executed a memorandum of understanding with DIRECTV (DTV), as per which which LodgeNet and DIRECTV plan to operate as strategic partners within the hospitality and healthcare markets. DIRECTV will provide operational, technological and marketing capabilities to help deliver new and improved LodgeNet services.
"The Colony Syndicate's investment and the new credit agreement provide added financial flexibility, while Colony Capital's industry experience and DIRECTV's new contributions will ensure LodgeNet's continued market leadership...," the company said.
Closing of the deal is subject to various closing conditions, including Bankruptcy Court confirmation of a Chapter 11 Plan.
Sioux Falls, South Dakota-based LodgeNet has been incurring losses over the past years, and the company has been facing a number of challenges in regard to Guest entertainment performance and room churn, both of which continue to impact its financial performance. Through the three quarters of 2012, its revenues slid 13 percent from the prior year to $278.7 million.
Stifel Financial Corp. (SF)'s Miller Buckfire division, FTI Consulting Inc. and Moorgate Securities LLC were the financial advisers to LodgeNet, and Weil, Gotshal & Manges LLP and Leonard, Street & Deinard were legal advisers.
LodgeNet closed Monday at $0.052, down 35.00%, on a volume of 5.9 million shares on the Nasdaq.
by RTT Staff Writer
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