LodgeNet Bankruptcy Looming

: Chris Lee Law Firm

  Filed under: News

Sioux Falls-based LodgeNet Interactive Corp, a provider of cable TV, on-demand movies, Nintendo video games and internet services to hotels and hospitals, will likely declare Chapter 11 bankruptcy at the end of this month. A declining revenue and money owed to vendors has put a significant strain on operations.

Working Towards Debt Resolutions

LodgeNet was granted a two-week extension on $26 million in overdue payments to two of its vendors. The company reached an agreement with DirecTV LLC and Home Box Office Inc., to extend a deadline for payment until Dec. 31 and in one case until Jan. 14. However, it appears a Chapter 11 bankruptcy filing may still occur.

“If we are unable to obtain sufficient liquidity to make such payments, which is likely, or such payments are not further deferred, we would be forced to file under Chapter 11 of the U.S. Bankruptcy Code at the end of December,” the company said in its SEC filing. “The company is in active negotiations with its lenders and a potential investor in an effort to structure an orderly bankruptcy process.”

The publicly traded company disclosed its financial situation as part of its third-quarter earnings report. LodgeNet posted a nearly $2 million net loss for the quarter that ended September 30. Revenue in hospitality and advertising services for their third quarter fell $20 million dollars from the same period last year. The number of guest rooms served during the third quarter dropped nearly 12 percent and movie revenue per hotel room has been declining over the past two years as well. LodgeNet has entered into forbearance agreements with DirecTV and HBO to continue receiving services from them. The company owes payments of $20 million to DirecTV and $6 million to HBO. LodgeNet has made efforts to cut costs this year, including an 11 percent reduction in its workforce and vacating leased warehouse and office space.

A statement from the company notes,  “Now, and during a Chapter 11 process, it is and will be business as usual at LodgeNet. Our company has a solid underlying business, strong support from our customers and continues to generate healthy operating cash flow. Although we are navigating through a difficult, short-term financial situation, we believe we are on a path that will address our challenges and create a strong, vibrant company over the long term.”

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