LodgeNet Interactive Corporation (NASDAQ: LNET) today announced that it has priced its previously announced private offering of preferred stock. LodgeNet will issue 50,000 shares of 10% Series B Cumulative Perpetual Convertible Preferred Stock, $0.01 par value, with a liquidation preference of $1000 per share. The Company also granted the initial purchasers a 30-day option to purchase up to an additional 7,500 shares of preferred stock to cover overallotments. The preferred stock will be resold to a group of qualified institutional buyers pursuant to the Rule 144A exemption from registration under the Securities Act of 1933, as amended. The sale of the preferred stock is expected to close on June 29, 2009. The Company will pay cumulative dividends on the preferred stock from June 29, 2009 at a rate of 10% per annum of the $1000 liquidation preference per share, subject to adjustment in certain circumstances.

The preferred stock will be convertible, at the holder’s option into common stock of LodgeNet at an initial conversion rate of 264.5503 shares of LodgeNet’s common stock per share of preferred stock, which is equivalent to an initial conversion price of $3.78 per share, or a conversion premium of approximately 10% based on the consolidated closing bid price of $3.43 per share of LodgeNet’s common stock on June 23, 2009.

The Company may elect, on or prior to July 15, 2014, to mandatorily convert some or all of the preferred stock into shares of LodgeNet’s common stock if the closing price of the Company’s common stock has exceeded 150% of the conversion price for at least 20 of the 30 consecutive trading days ending the day before the Company sends the notice of mandatory conversion. If the Company elects to mandatorily convert any preferred stock on or prior to July 15, 2014, it will make an additional payment on the preferred stock, payable at the Company's election in cash or common stock, equal to the aggregate amount of dividends that would have accrued through and including July 15, 2014, less any dividends already paid on the preferred stock. The Company may also elect, on or after July 16, 2014, to mandatorily convert some or all of the preferred stock into shares of LodgeNet’s common stock if the closing price of the Company’s common stock has exceeded 125% of the conversion price for at least 20 of the 30 consecutive trading days ending the day before the Company sends the notice of mandatory conversion.

The Company estimates that the net proceeds from this offering will be approximately $46.7 million in cash, exclusive of net proceeds received if the initial purchasers exercise the overallotment option in part or in full, after deducting estimated discounts, commissions, and expenses. The principal purpose of the offering is to improve the Company’s consolidated leverage and interest coverage ratios.  Accordingly, LodgeNet expects to use half of the net proceeds of the offering to immediately reduce the outstanding balance on the term loan under its Credit Facility and use the balance of the proceeds for general working capital purposes, including further voluntary reductions of the term loan.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities (including the shares of common stock into which the securities are convertible) and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful. The preferred stock and the underlying common stock issuable upon conversion have not been registered under the Securities Act or any applicable state securities laws and may not be offered or sold in the United States, absent registration or an applicable exemption from such registration requirements.