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Penthouse Pulls Out Of Bankruptcy

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Jan 22, 2004 12:00 AM PST    Text size: 
GREENWICH, Connecticut – After filing bankruptcy toward the end of 2003, General Media Inc., the publisher of Penthouse magazine, has tapped Seneca Financial Group Inc. to lead the famous porn publishing empire out of the woods.

General Media also publishes Forum and Penthouse Letters, in addition to controlling Penthouse-branded websites.

Penthouse publisher Bob Guccione, admitting to hard times, a steep decline in sales and revenue, and dwindling circulation, filed for bankruptcy protection in August 2003.

According to reports, Penthouse's circulation took a dive from more than one million in 1998 to 565,000 in 2003.

There is some speculation that Penthouse lost its footing as one of the leading porn publications by pushing the envelope too far in terms of its explicit sexual content, a move that many critics say scared away advertisers. There were also reports that Guccione's fortune took a bad turn after a failed investment in an Atlantic City casino.

The Guardian reported that in 2003, Penthouse skipped three issues because it was unable to pay its printers, and employees took a 75 percent pay cut.

Guccione himself was also cast into the bankruptcy limelight as he weathered his own financial demise. He was reportedly evicted from his corporate headquarters and put his 45-room estate up for sale.

With an estimated $40 million in debt riding on its back, the porn magazine maintained a spotty publishing schedule as it awaited a hearing in bankruptcy court to approve its restructuring plan, which in the end could sway control of the company into the hands of creditors.

The terms of Guccione's Chapter 11 filing state that the old bondholders, who are owed about $45 million, will exchange the notes for 1 million shares of common stock in the company and $27 million in new notes.

But according to Guccione's lawyer, that could be a good thing that might breathe some new investment life into Penthouse's outdated business model. Additionally, under the new restructuring plan, Guccione would retain his title and control of the porn magazine's editorial content and draw in an annual salary of $500,000 for the next ten years.

Penthouse's hiring of Seneca Financial is being seen as a good move for the porn publisher, and with the bankruptcy court's approval, Seneca could possibly lead the company out of hard times and back into profitability.

A proven specialist in' turnaround management,' for the telecommunications sector, Seneca will oversee the company's finances and general operations until Guccione's empire gets back on its feet.

Penthouse has announced that it expects to emerge from bankruptcy by March of this year.

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