LodgeNet Interactive To File Chapter 11 Bankruptcy Protection
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LodgeNet Interactive To File for Chapter 11 Bankruptcy Protection

January 14, 2013


LodgeNet Interactive Corp., the company responsible for on-demand movies in hotel rooms, is considering seeking bankruptcy protection after its revenues endured a five-year slump, according to a Bloomberg News report.

If the entertainment company does end up going to bankruptcy court, it will be doing so with a set plan, however, as it reportedly has a deal in place with Colony Capital LLC to receive a $60 million investment, sources say.

According to reports, affiliates of Colony Capital will invest $60 million in LodgeNet in exchange for the right to become its controlling shareholder. If this agreement, which still must be approved by a bankruptcy judge, goes through, Colony Capital will assume full ownership of LodgeNet.

In return, LodgeNet would be able to continue its operations as normal, although its new owners could make some major adjustments. The deal was struck after years of financial struggles for LodgeNet, which last posted a profit in 2006.

Sources say the company became too dependent on the hotel industry, with at least 95 percent of its revenue coming from that single channel.

To make matters worse, a third of the company’s sales reportedly came from Hilton Worldwide and Marriot International Inc., both of whom could likely turn to a different entertainment provider at the drop of a hat.

In order to diversify its activities, LodgeNet tried to extend into the health care field in 2011. This involved efforts to install its eSUITE technology system in medical facilities. But the company had only sold its system to 68 medical institutions by the end of last year, sources say.

In a recent statement, LodgeNet’s current chairman, Doug Bradbury, expressed optimism about the company’s future but remained vague about its specific business plans, including whether it will in fact file for Chapter 11.

According to Bradbury, “[u]nder 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.”

A bit more detail was provided last week by Bloomberg News, which reported that LodgeNet plans to partner with DirecTV to strengthen its presence in the health care field.

The agreement provides a bit of hope for LodgeNet, which still offers Internet access and other entertainment services for roughly 1.5 million hotel rooms in North America.

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