LodgeNet Gets Interim Approval to Tap $5 Million of Bankruptcy Loan

By Stephanie Gleason

Hotel media provider LodgeNet Interactive Corp. (LNET) received bankruptcy-court approval to access $5 million of its bankruptcy financing, in addition to a number of other procedural motions that will allow the company to continue its operations while under Chapter 11 protection .

A final hearing to provide LodgeNet full access to its bankruptcy financing, which includes $15 million in new loans and a $15 million refinancing of prepetition debt, is set for Feb. 27.

LodgeNet, which provides DirecTV ( DTV ), HBO, pay-per-view movies and other services in hotel rooms throughout the U.S., filed for Chapter 11 bankruptcy on Sunday with a plan to hand over the company to private-equity firm Colony Capital LLC in exchange for a $60 million infusion of new capital. The plan allows it to pay unsecured creditors in full and provide a substantial recovery to secured creditors in the case.

The bankruptcy attorney for LodgeNet, Sylvia Mayer of Weil Gotshal & Manges LLP, said during the hearing Tuesday afternoon that the company has received unanimous support of the plan from the creditors who have voted so far--63% of creditors have voted, representing 76% of LodgeNet's debt. These percentages are already high enough to allow for confirmation of the plan.

Judge Shelley Chapman of the U.S. Bankruptcy Court in Manhattan set a hearing to consider the restructuring plan for March 7, which keeps the company on track to complete its reorganization within 60 days.

The company, which provides cable and Internet services to 6,800 hotels in the U.S. and Mexico, including Hilton Worldwide, Marriott International Inc. ( MAR ) and Starwood Hotels & Resorts Worldwide Inc. ( HOT ), said that its revenues have been hurt by the entrance of tablets and mobile devices into the mainstream, in addition to lingering effects of the financial crisis which affected travel and consumer spending.

Customers' access to movies and television shows on mobile devices led to a decline in the number pay-per-view movies ordered, the company said. Also, the number of hotel rooms that provide its services has fallen to 1.5 million, from two million during 2009.

As part of the restructuring, LodgeNet also negotiated a new partnership with DirecTV, which is LodgeNet's largest unsecured creditor and one of its most important vendors, the company said. DirecTV agreed to support the restructuring and will assume some installation costs so that LodgeNet can continue to provide DirecTV cable to its customers.

The company claimed $291.7 million in assets and $448.7 million in liabilities in its bankruptcy petition.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Write to Stephanie Gleason at

stephanie.gleason@dowjones.com.

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