Moody's ups LodgeNet view to positive

Moody's Investors Service said it revised LodgeNet Entertainment Corp.'s outlook to positive from stable and affirmed the company's B1 corporate family and probability-of-default ratings, Ba1 senior secured revolver and term loan (LGD2, 16%) and B2 9½% senior subordinated notes (LGD5, 72%).

The positive outlook reflects the agency's expectation that LodgeNet will continue to have good operating performance and use its growing free cash flow to repay debt and that, as a result, the company's debt-to-EBITDA ratio may fall to the mid-to-high 2x range in 2007.

LodgeNet's ratings continue to reflect significant exposure to the lodging industry's inherent cyclicality, seasonality and volatility, as well as the company's dependence on the quality of Hollywood product, significant need for capital investment and thin interest coverage after capital expenditures, Moody's said.

The ratings are supported by LodgeNet's large installed room base and the consequent advantages of scale, growing free cash flow and diversification from the new revenues streams, such as from services to health care facilities and travel centers.

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