LodgeNet Entertainment accepts early-tendered 10¼% '06 notes for payment

New York, June 19 - LodgeNet Entertainment Corp. (B3/B-) said that it had delivered notice to HSBC Bank USA - the depository for its previously announced tender offer for its 10¼% senior notes due 2006 and the related consent solicitation - that it had accepted for purchase all of the 10¼% notes tendered by the now-expired consent deadline (approximately 79% of the outstanding amount).

Lodgenet said that the supplemental indenture incorporating the proposed indenture amendments for which it had been seeking noteholder consent thus became operative (and binding upon all of the 10¼% notes, tendered or not) upon delivery of the notice of acceptance of payment.

The tender offer will meantime continue to the scheduled June 30 expiration deadline, subject to possible extension, and LodgeNet said it will subsequently call for redemption any notes not tendered in the offer.

Further, LodgeNet announced the official closing of its June 13 sale of new senior subordinated notes due 2013, the proceeds of which will be used to fund the current tender offer and to repay borrowings under its revolving credit facility.

And LodgeNet said that it had received the consent of the lenders under its senior credit facility to permit the senior subordinated notes offering, giving the company more financial flexibility. Among other things, the amendment increases LodgeNet's permitted consolidated total leverage ratio, through the fourth fiscal quarter of fiscal 2003, to a maximum of 5 times total debt-to-EBITDA, as defined by the credit facility, 4.75 times total debt-to- EBITDA for the first half of 2004 and 4.5 times total debt-to EBITDA-for the second half of 2004.

As previously announced, LodgeNet, a Sioux Falls, S.D. provider of interactive television and Internet access services to the lodging industry in the U.S., Canada and internationally, said on June 3 that it had begun the cash tender offer and consent solicitation for all of its $150 million outstanding principal amount of the 10¼% notes.

The company set the now-expired consent deadline of 5 p.m. ET on June 11, and said the offer would expire at 12 midnight ET on June 30, subject to possible extension.

It said that total consideration to be paid for validly tendered notes not subsequently withdrawn would be $1,026.88 per $1,000 principal amount of notes tendered, plus any accrued and unpaid interest on the notes up to but not including the date of payment.

That total consideration would include a $20 per $1,000 principal amount consent payment for those holders tendering their notes and validly delivering their consents to proposed indenture amendments prior to the consent date.

The company said it would seek holder consents to indenture amendments that, among other things, would eliminate substantially all of the indenture's restrictive covenants and would amend certain other indenture provisions, including reduction of the notice period necessary for a redemption of the notes to three business days from 30 calendar days.

It said that adoption of the proposed amendments would require the consent of the holders of at least a majority of the principal amount of the notes outstanding, a condition now fulfilled. Holders tendering their notes would be required to also consent to the proposed amendments, and holders would not be allowed to deliver consents to the proposed amendments without also tendering their notes.

LodgeNet said holders tendering their notes after the consent date would receive the total consideration minus the $20 consent payment, or $1,006.88 per $1,000 principal amount, plus accrued and unpaid interest.

Notes validly tendered prior to the consent date could not be withdrawn and consents could not be revoked after the consent date. Notes tendered after the consent date may be withdrawn at any time before the expiration date of the tender offer.

The company said the tender offer would be subject to, among other things, the now-fulfilled condition of receipt of consents necessary to adopt the proposed amendments.

It is also subject to the completion by LodgeNet of certain related financing transactions (LodgeNet separately but concurrently announced plans to sell up to $185 million of senior subordinated notes pursuant to an effective shelf registration statement on file with the Securities and Exchange Commission; LodgeNet said it expected to use substantially all of the net proceeds of the offering to repay outstanding indebtedness).

On June 12, LodgeNet said that it had received the requisite number of consents to the proposed indenture changes, with holders of approximately 79% of the outstanding notes having tendered their notes and delivered consents to the indenture changes by the consent deadline.

LodgeNet said that having gotten the requisite consents, it planned to enter into a supplemental indenture that would put into effect the proposed amendments; however, these would not become operative unless and until the notes were accepted and paid for under the terms of the tender offer. Once the proposed indenture amendments become operative, the holders of any notes not tendered into the offer will still be bound by them.

On June 13, high yield syndicate sources said that LodgeNet had sold an upsized $200 million offering of new 9½% senior subordinated notes due 2013, with proceeds slated to fund the tender offer for the existing notes.

Bear, Stearns & Co. Inc. is acting as the exclusive dealer manager and solicitation agent for the tender offer and the consent solicitation (call the Global Liability Management Group at 877 696-2327 with any questions about the offer or the solicitation). D. F. King & Co., Inc. will be the information agent for the offer (call 212-269-5550 with any requests for documentation). The depositary for the tender offer is HSBC Bank USA.

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