Overview -- LodgeNet failed to make its Dec. 31, 2012 scheduled cash interest payments on its revolving credit and term loan and Dec. 31, 2012 term loan amortization payment. -- We lowered our corporate credit rating on LodgeNet to 'D' from 'CC'. Rating Action On Jan. 4, 2013, Standard & Poor's Ratings Services lowered its corporate credit rating on Sioux Falls, S.D.-based LodgeNet Interactive Corp. to 'D' from 'CC'. The downgrade follows the company's failure to make its Dec. 31, 2012 scheduled cash interest payments on its revolving credit and term loan and Dec. 31, 2012 term loan amortization payment. The company has received an extension on its forbearance agreement with its secured lenders who have agreed to accept these payments in kind and not to accelerate their claims until Feb. 5, 2013. Rationale Under Standard & Poor's criteria, we view the changing of the payment terms to payment-in-kind (PIK) tantamount to a default, even with the bank's consent. We view LodgeNet's heavily debt-burdened capital structure, and weak operating trends as indications of financial distress. We assess management and governance as "fair" as we believe there are significant risks relating to its private-equity ownership. Under the terms of the company's proposed recapitalization and planned Chapter 11 bankruptcy filing, LodgeNet's existing credit agreement will be amended to provide an extension in the form of a $346.4 million five-year term loan plus accrued interest that is being capitalized prior to the closing date. New investor Colony Capital will invest $60 million in exchange for all the new shares of common stock. Holders of the existing series B preferred stock and common stock will have their interests cancelled. Closing of the entire transaction is subject to lender approval and bankruptcy court confirmation of a Chapter 11 Plan. Related Criteria And Research -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Ratings List Downgraded; Recovery Ratings Unchanged To From LodgeNet Interactive Corp. Corporate Credit Rating D/-- CC/Negative/-- Downgraded To From LodgeNet Interactive Corp. Senior Secured D CC Recovery Rating 3 3 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.