LodgeNet Interactive Corporation (NASDAQ:LNET)  today announced that it has successfully completed its offering of 50,000 shares of 10% Series B Cumulative Perpetual Convertible Preferred Stock, $0.01 par value, with a liquidation preference of $1,000 per share. In addition, the Company announced that the initial purchaser exercised the option to purchase an additional 7,500 shares of preferred stock to cover over-allotments in full, bringing the total amount of the preferred stock sold to 57,500 shares. The Company will pay cumulative dividends on the preferred stock from June 29, 2009 at a rate of 10% per annum of the $1,000 liquidation preference per share, subject to adjustment in certain circumstances. Merrill Lynch, Pierce, Fenner & Smith Incorporated acted as the sole initial purchaser in the offering.  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 corporate purposes, including further voluntary reductions of the term loan.

“The successful completion of this offering significantly strengthens our balance sheet and better positions us to continue to implement our strategic growth initiatives,” said Scott C. Petersen, Chairman and CEO of LodgeNet Interactive Corporation.  “The resulting decrease in our leverage and increase in our cash position will greatly assist us in continuing to maintain compliance with our Credit Facility – which has very favorable pricing terms – despite a very challenging and uncertain economic outlook.”  

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, subject to certain conditions. 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.

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.