Wall Street Journal Takes Close Look at Playboy Enterprises

Rhett Pardon

LOS ANGELES — Playboy Enterprises could go public again.

That and other details in an article in the Wall Street Journal today give a bird's eye view into the finances and new culture at the Beverly Hills, Calif.-based publisher and licensor, which is preparing for its 60th anniversary later this year.

The Wall Street Journal's piece paints a company that is much smaller but more profitable, while not hitting profitability targets set by its lenders in loan covenants.

After negotiations with lenders, Playboy needs to show that it is on track to generate $47 million this year in EBITDA — earnings before interest, taxes, depreciation and amortization — which  gives an indication on the operational profitability of the business.

Adjusted EBITDA improved to $38.9 million for the year ended September, up from $19.3 million in 2009.

But if Playboy misses loan guarantees in its next quarter, Rizvi Traverse, the private-equity firm that led the buyout with founder Hugh Hefner, will have to kick in $10 million beyond their original investment.

Playboy, which relies mostly on licensing revenue, has found a revenue stream that is "often uneven," the article said, pointing to adult entertainment conglomerate Manwin.

"Already Manwin has tried to renegotiate the $14 million it promised to pay Playboy annually because the digital and TV content isn't generating enough revenue, according to people familiar with the matter," the article said. "Playboy said that, while such discussions were initiated, it refused to accommodate a reduction of its minimum guarantees."

Playboy also found itself in violation of its loan covenants in part because the Palms Casino's Playboy Club closed down, depriving Playboy of $4 million in annual licensing payments, the article said.

Because investor Rizvi Traverse will be looking for a return on its investment before long, CEO Scott Flanders told the Wall Street Journal that Playboy would be "well positioned to pursue a public offering at the end of 2014."