Penthouse's Assets to Be Sold at Auction

CHATSWORTH, Calif. — The bankruptcy trustee appointed to oversee Penthouse Global Media’s Chapter 11 case has entered into a purchase agreement to sell assets of the iconic adult entertainment company at auction to Dream Media Corp. unless a qualified overbid is received by June 4.

Companies wishing to overbid the so-called "stalking horse bidder" for all of Penthouse’s assets can reach Broadway Advisors LLC in Newport Beach for details.

Substantially all of Penthouse’s assets are included in the sale — intellectual property, videos, publications, broadcasting and digital rights.

The company, founded in 1965, publishes Penthouse Magazine and Penthouse Letters and operates eight TV channels in more than 100 countries, which account for 50 percent of its revenue.

It also has hundreds of licensing agreements in place for products and media content, as well as scores of websites.

Excluded from the sale are Penthouse Clubs licensing, income from its licensing agreement with Vice Industry Token and certain accounts receivable.  

Last month, trustee David Gottlieb said in a motion that Penthouse is administratively insolvent, operating at an ongoing loss, and that there’s no likelihood of the company’s financial rehabilitation.

Because reorganization through Chapter 11 is not feasible, Gottlieb declared that he would seek to sell Penthouse’s assets in June.

Gottlieb, in a brief to the court, said that financial advisors and Penthouse CEO Kelly Holland recently met extensively to go through the company’s books to come up with cash-flow projection plans for coming months.

Analysis of the books, however, came up with sobering realities, particularly in light of additional post-petition expenses incurred while auditing the years 2016 and 2017. Records for those years were found to be “incomplete” and “inaccurate.” 

“According to projections, the debtors will lose approximately $732,000 over the next three months,” Gottlieb’s motion said. “The trustee has determined that there exists no reasonable prospect of rehabilitating the debtor’s operations through a Chapter 11 plan of reorganization.”

Gottlieb, in a declaration to the bankruptcy court, said that he’s been in discussions with Dream Media as to its claim and sale of assets. Dream Media claims Penthouse defaulted on loans to ExWorks Capital Fund.

Dream Media now holds the ExWorks loans and claims Penthouse owes it more than $10 million.

Dream Media is led by media investor Adam Levin, who is CEO of Oreva Capital, a Los Angeles-based investment firm that last year bought cannabis-enthusiast magazine High Times.

Oreva Capital also was involved with the management-led buyout last year of Here Publishing, which operates LGBT media brands the Advocate, Pride, Plus, Out Traveler and LGBT.com.

Holland purchased the assets of Penthouse in 2016 from FriendFinder Networks Inc., which had filed for bankruptcy in 2013.

Holland has worked in the adult entertainment industry for more than 20 years and joined Penthouse in 2006, where she helmed its broadcast division.

Broadway Advisors can be reached at amm@broadwayadvisors.com.