NEW YORK (Dow Jones)–LodgeNet Interactive Corp. (LNET) said Wednesday that it “stands behind its guidance” and doesn’t expect to see any impact on debt repayment, following an analyst report that said a hotel-chain customer is phasing out adult video offerings in its rooms.
LodgeNet’s shares pared their losses in recent trading, down 17% to $3.42 after earlier falling as low as $2.88 on more than 12 times the average daily volume.
The company, which provides television and Internet services to hospitality and health-care businesses, said the hotel customer’s policy change isn’t expected to have any impact on its compliance with its debt covenant. A note from Craig-Hallum Capital Group Senior Research Analyst Frank McEvoy said there is an increasing likelihood the company could violate the covenant.
In the note, McEvoy said the firm had learned that one of LodgeNet’s largest hotel customers has implemented a policy that prohibits adult video-on-demand movie offerings in its new hotel properties and bans the offerings at existing properties after its contracts with LodgeNet expire.
The firm said that, assuming about 50% of LodgeNet’s guest entertainment revenue at these hotels is from adult titles, it estimates the annualized loss of revenue would be about $25 million, a small portion of which may have affected the second and third quarters of 2010.