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LodgeNet to File for Chapter 11, Colony Capital Takes Control

LodgeNet Interactive Corporation has announced that it has entered into a definitive agreement with a syndicate formed by an affiliate of Colony Capital, a global investment firm. Colony Syndicate will provide $60 million of new capital to support a proposed recapitalization of LodgeNet. In addition, LodgeNet 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.
The transaction will be implemented through an expedited Chapter 11 bankruptcy process, at the conclusion of which the Colony Syndicate would become the controlling stockholder of the Company. The plan of reorganization envisions that unsecured creditors of LodgeNet will be paid in full for any pre-petition claims at the conclusion of the Chapter 11 process.
Colony has also executed a memorandum of understanding with DIRECTV, LLC, setting forth certain terms pursuant to which LodgeNet and DIRECTV intend to operate as strategic partners within the hospitality and healthcare markets. As part of the expanded partnership between the two companies, DIRECTV will provide its operational, technological and marketing capabilities to help deliver new and improved LodgeNet services to the industry.
Importantly, throughout this process, LodgeNet’s current hospitality and healthcare customers will continue to receive LodgeNet’s entertainment and connectivity services, as well as ongoing maintenance and support, without interruption.
Under the terms of these agreements, the Colony Syndicate will receive new common stock representing 100 percent ownership of LodgeNet. In order to provide LodgeNet time to solicit votes on the proposed Chapter 11 plan, DIRECTV, HBO and the steering committee of lenders have agreed to extensions of their existing forbearance agreements.
 “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,” said LodgeNet Interactive chairman Doug Bradbury.
LodgeNet and the Colony Syndicate have agreed to implement this transaction via an expedited Chapter 11 proceeding which would commence once the requisite consents of its lenders have been obtained. Concluding the recapitalization in a controlled, court-supervised environment will allow LodgeNet to continue operating without interruption, address short-term liquidity issues, complete the Colony Syndicate’s transaction, and amend the credit agreements with its lenders.
“As evidenced by our investments in hospitality, media and entertainment,
we believe in these markets, and with LodgeNet positioned at the crossroads
of all three, this opportunity is tailor-made for Colony Capital,” commented Richard Nanula, Principal at Colony Capital. “We look forward to leveraging our experience and key industry relationships to drive change at a critical time for the company and the industries it serves. Together with DIRECTV and our hospitality and healthcare customers, we are committed to building on the company’s position as the preeminent provider of commercial entertainment and connectivity services, as we believe strongly that for LodgeNet, the future
is now.”
The recapitalization is designed to enable a restructured LodgeNet Interactive to emerge from Chapter 11 on a standalone basis with strong cash flow and a solid balance sheet.

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