Real estate investment firm Colony Capital has completed its acquisition of in-room entertainment systems specialist LodgeNet Interactive, thereby completing the latter’s emergence from pre-packaged Chapter 11 bankruptcy protection.
Under the terms of…
Real estate investment firm Colony Capital has completed its acquisition of in-room entertainment systems specialist LodgeNet Interactive, thereby completing the latter’s emergence from pre-packaged Chapter 11 bankruptcy protection.
Under the terms of the transaction, a Colony-led syndicate of investors provided US$70m of new capital to help fund LodgeNet’s recapitalisation. A portion of this was then used to pay any pre-petition claims made by LodgeNet’s unsecured creditors.
The recapitalisation was the central condition to LodgeNet’s emergence from Chapter 11 and following its completion, the investor group were issued new common stock representing 100% of LodgeNet.
In addition, LodgeNet secured a new US$358m long term senior secure credit facility after the existing lenders agreed to amend the existing facility and extend it by a further five years.
Colony has moved quickly to bring in its own management team. Richard Nanula, Colony principal and chairman of Miramax, will serve as LodgeNet’s chairman, while Michael Ribero has been named president and chief executive officer.
Nanula has previously served as the CFO of both The Walt Disney Company and Amgen as well as president and COO of Starwood Hotels and Resorts. Ribero is the former chief marketing officer at Hilton and Eastern Airlines and is on the board of the Tropicana Las Vegas Hotel and Casino.
Ribero commented: “We are refocusing LodgeNet to provide a new range of opportunities for our customers. Together with Colony, which brings financial and operational flexibility and the new strategic partnership with DirecTV, we will offer our customers new entertainment and connectivity options, as well as equipment financing that provides a solid foundation for growth.”
The role of the satellite broadcaster is central to Colony’s new strategy, with LodgeNet and DirecTV forming a strategic partnership within the hospitality and healthcare markets.
The deal will expand the current free-to-guest programming agreement and see DirecTV branding, content, advertising and support throughout LodgeNet’s in-room offering. In return, LodgeNet estimates that the partnership will significantly reduce its capital requirements.
Cutting costs is vital to LodgeNet’s future prosperity with the company having been forced into bankruptcy protection after it failed to meet its debt repayment requirements. LodgeNet suffered from a combination of being highly leveraged, due to a series of debt-funded acquisitions in the 2000s, and then experiencing a sharp decline in revenues during the economic downturn as hotel bookings slumped and guests switched to personal electronic devices.
Colony believes that as it is one of the largest owners of hospitality assets in the world as well as the owner of film studio Miramax it is well placed to make LodgeNet profitable.
Miller Buckfire & Co, FTI Consulting and Moorgate Securities served as financial advisers to LodgeNet on the transaction with Weil, Gotshal & Manges its restructuring legal counsel and Leonard, Street and Deinard its corporate legal adviser. Colony Capital was advised by Guggenheim Securities with Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor and Sullivan & Cromwell its legal counsel. Akin Gump Strauss Hauer & Feld and CDG Group acted as advisers to the special committee of the lenders.
