Lodgenet first day decl

  • View

  • Download

Embed Size (px)



Text of Lodgenet first day decl

  • 1. 13-10238 Doc 3 Filed 01/27/13 Entered 01/27/13 18:10:27 DocketDocument Filed: 1/27/2013 Main #0003 Date Pg 1 of 78UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------x :In re : Chapter 11 :LodgeNet Interactive Corporation, et al.,1 : Case No. 13-_____ (___) : : (Joint Administration Requested) Debtors. :---------------------------------------------------------------x AFFIDAVIT OF MARK WEINSTEN IN SUPPORT OF THE DEBTORS CHAPTER 11 PETITIONS AND REQUESTS FOR FIRST DAY RELIEF I, Mark Weinsten, being fully sworn, hereby declare that the following is true tothe best of my knowledge, information, and belief: I. INTRODUCTION 1. I am a Senior Managing Director of FTI Consulting, Inc. (FTI) and aCo-Strategic Planning Officer (SPO) of LodgeNet Interactive Corporation (LodgeNetInteractive and, collectively, with its affiliated debtors in the above-referenced cases, theDebtors). I submit this Affidavit (the Affidavit) to provide the Court and interested partieswith information regarding the recapitalization and reorganization of LodgeNet Interactive, aswell as information regarding the circumstances that led to the commencement of these chapter11 cases. 2. Simultaneously with the filing of this Affidavit, the Debtors have filedtheir chapter 11 plan of reorganization (the Plan), pursuant to which a group of investors ledby Col-L Acquisition, LLC, (Colony), a subsidiary of Colony Capital, LLC (Colony1 The Debtors, together with the last four digits of each Debtors federal tax identification number, are:LodgeNet Interactive Corporation (1161), LodgeNet StayOnline, Inc. (3232), On Command Corporation (5194),The Hotel Networks, Inc. (4919), On Command Video Corporation (8458), Puerto Rico Video EntertainmentCorporation (6786), Virgin Islands Video Entertainment Corporation (6611), Spectradyne International, Inc. (9353),LodgeNet Healthcare, Inc. (0337), Hotel Digital Network, Inc. (7245), and LodgeNet International, Inc. (2811).US_ACTIVE:441276002259848.0004 1?"F-!; #9 1310238130127000000000003
  • 2. 13-10238 Doc 3 Filed 01/27/13 Entered 01/27/13 18:10:27 Main Document Pg 2 of 78Capital), will invest at least $60 million in exchange for 100% of the common stock ofreorganized LodgeNet Interactive (the Colony Transaction). The Colony Transaction wasselected by the Debtors following a thorough search for potential acquirers or investors by theDebtors and their advisors. 3. On January 4, 2013, prior to the commencement of these cases, theDebtors began the solicitation of votes on their Plan, which is the means for implementation ofthe proposed recapitalization of the Debtors and the Colony Transaction. Pursuant to the Plan,unsecured claims will be paid in full and the prepetition secured lenders will receive their prorata share of an amended and restated credit facility (the Exit Term Loans). The only creditorsentitled to vote under the Plan are the Prepetition Lenders under the Prepetition CreditAgreement (both defined below). As of the date hereof, over 56% of the Prepetition Lenders (asdefined below), who are the only creditors entitled to vote on the Plan, and over 73% of the totalamount of debt under the Prepetition Credit Agreement have voted to accept the Plan. As of thedate hereof, no Prepetition Lenders have voted against the Plan. The voting deadline isFebruary 4, 2013. 4. The Plan provides for an amendment to the terms of the DebtorsPrepetition Credit Agreement (as defined below) to, among other things, extend the maturitydate, adjust the interest rate, modify certain financial covenants, and potentially bifurcate theloan into a first lien and a second lien piece. The Plan also contemplates the Debtors entry intoa new agreement with DIRECTV pursuant to which DIRECTV will assume the cost ofinstallation of systems in hotels and healthcare facilities, alleviating the Debtors of this expensiveand cash intensive burden. Pursuant to the terms of the Plan, all allowed trade and other generalunsecured creditors will be paid in full in cash on or shortly after the effective date of the Plan 2US_ACTIVE:441276002259848.0004
  • 3. 13-10238 Doc 3 Filed 01/27/13 Entered 01/27/13 18:10:27 Main Document Pg 3 of 78the Effective Date). Because the existing equity in LodgeNet Interactive will be cancelled andbecause the contemplated amendments to the Prepetition Credit Agreement require unanimousconsent of the Prepetition Lenders, an out-of-court restructuring was not feasible, and achapter 11 case is necessary to consummate the Colony Transaction. 5. Having already received the requisite votes in favor of the Plan, theDebtors have commenced these Chapter 11 Cases prior to the expiration of the voting deadline.The Debtors seek to proceed to confirmation and consummation of the Plan as soon aspracticable to enable the expeditious payment of all creditors claims and the Debtorsemergence from chapter 11. 6. Colony will bring significant experience in both the hospitality and theentertainment industries to the Debtors business. The Debtors seek to restructure their businessto enable the implementation of the Colony Transaction and a modified business plan. Colonyfurther intends to work with the Debtors to (a) improve the Debtors technology, systems andprogramming platforms, (b) offer multiple tiers of services to hotels, (c) work with hotels toenhance guest satisfaction and brand loyalty, and (d) increase advertising revenues. 7. In addition, I submit this Affidavit (the Affidavit) pursuant toRule 1007-2 of the Local Bankruptcy Rules for the Southern District of New York (the LocalBankruptcy Rules) to assist the Court and other parties in interest in support of (a) the Debtorsvoluntary petitions for relief under chapter 11 of title 11 of the United States Code (theBankruptcy Code) filed on the date hereof and (b) the relief sought in the First Day Pleadings(as defined below). 8. Any capitalized term not expressly defined herein shall have the meaningascribed to that term in the relevant First Day Pleading. Any and all factual predicates for the 3US_ACTIVE:441276002259848.0004
  • 4. 13-10238 Doc 3 Filed 01/27/13 Entered 01/27/13 18:10:27 Main Document Pg 4 of 78relief sought in any of the First Day Pleadings that are set forth in such pleadings and not setforth separately in this Affidavit are incorporated by reference herein. 9. In my current capacity, I am familiar with the day-to-day operations,business, and financial affairs of the Debtors. As of the date hereof (the Petition Date), each ofthe Debtors has filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code withthe United States Bankruptcy Court for the Southern District of New York (the BankruptcyCourt). To enable the Debtors to operate effectively and minimize potential adverse effectsfrom the commencement of their chapter 11 cases (the Chapter 11 Cases), the Debtors haverequested certain relief in first day motions and applications filed with the Bankruptcy Court(collectively, the First Day Pleadings). 10. The First Day Pleadings, described more fully below, seek, among otherthings, to (a) schedule a hearing for the confirmation of the Plan and establish procedures forobjections to the Plan, (b) enable the Debtors to obtain postpetition debtor in possessionfinancing and use of cash collateral, (c) ensure the continuation of the Debtors cashmanagement system and other business operations without interruption, (d) preserve valuablerelationships with suppliers and customers, (e) maintain employee morale and confidence, and(f) establish certain administrative procedures that will promote a seamless transition intochapter 11. This relief is critical to the Debtors restructuring efforts. 11. Except as otherwise indicated, all facts set forth in this Affidavit (orincorporated by reference herein) are based upon my personal knowledge, my discussion withother members of the Debtors senior management, my review of relevant documents and theDebtors books and records, or my opinion based upon my experience and knowledge of theDebtors operation