LodgeNet Interactive Corp. (Nasdaq: LNET) will file for bankruptcy protection and entered into an agreement that will see it acquired by Colony Capital LLC.

The Sioux Falls, S.D.-based company, which provides media technology services to hospitals and hotels, said that Colony affiliate Colony Syndicate will provide $60 million in new capital to fund the recapitalization. Colony will become the controlling stockholder of the company, holding 100 percent ownership. A steering committee of lenders has approved a multi-year extension of its existing $346 million secured credit facility.

LodgeNet said it expects that its unsecured creditors will be paid in full for its pre-petition claims at the end of the bankruptcy process. The company secured a commitment for $15 million in debtor-in-possession from lenders.

Colony also made an agreement with DirecTV (Nasdaq: DTV), making it a strategic partner of LodgeNet in operating in the hospitality and healthcare markets.

Moody’s Investors Service downgraded the company earlier this month citing its probability of restructuring in the wake of declines in revenue and secular trends in the cable television and content providing markets. The credit rating firm downgraded LodgeNet's corporate family rating to Ca from Caa1 and probability of default rating to Ca from Caa2. Standard & Poor’s also downgraded the company to CC from CCC with a negative outlook in December. It downgraded the company’s senior secured recovery rating to CC from CCC as well.

LodgeNet’s revenue declined by 12 percent, 13 percent and 15 percent in the first three quarters of the year, respectively. Ebitda, over the same period, has declined by 28 percent in Q1 and Q2, and 29% in Q3.

The company pulled an offering for $435 million in senior secured second-lien notes in September 2010.

Matthew Sheahan reports for Leveraged Finance News

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