BOCA RATON, Fla. — Penthouse Magazine and AdultFriendFinder.com owner FriendFinder Networks Inc. (FFN) has filed for Chapter 11 bankruptcy protection in Wilmington, Del., after reporting losses in seven consecutive years to 2012.
The company listed assets of less than $10 million and liabilities of as much as $500 million to $1 billion, according to court papers.
FFN CEO Anthony Previte, who took over the top post in July of 2012 after Marc Bell stepped down from his position, told XBIZ that the central reason for the company’s restructure was due to mounting compounded debt over time that had banks, credit card processors and creditors perceiving the company as a bad risk despite it having paid back nearly $150 million.
“It was tough to keep up with the accretion of debt. We hit a tough spot in September of 2012 because of it,” Previte said.
The company’s filing read, "Despite continuing member interest and high volume traffic, the debtors did not make certain payments to the holders of existing first lien notes and cash pay second lien notes which constituted a default under their respective indentures.”
FFN has reportedly not made a profit since at least 2006 and reported a second-quarter net loss of $10.3 million, or 32 cents a share, on Aug. 15. It had cash or equivalents of $38.6 million on Mar. 31 compared with outstanding principal debt of $544 million, according to the financial statement.
Although the company’s live cam and dating businesses are doing well, according to Previte, Penthouse magazine has been the company’s biggest drain. He said shrinking retail outlets and scarcity of printers has hurt the publication. And although there are no immediate plans to kill the magazine, its long-term fate is questionable because of these external factors.
“The magazine will always be in digital form and will continue to be a marketing vehicle for clubs and broadcasters,” Previte noted.
Penthouse video production however, will continue operating along with the release of new 3D movies. But Previte said the current climate in California regarding adult productions is challenging and may force long-term changes.
In the Aug. 15 statement, Previte said the company was working with advisers and lenders to refinance the long-term debt.
Previte told XBIZ that the Chapter 11 restructuring has cleared the company’s balance sheet of $300 million in debt, making it more appealing to creditors and affiliates worried about its fate. “Unlike private adult companies, being public allows everyone — including our competitors — to look under the kimono and know exactly where we’re at,” he said.
There are no company layoffs, shut downs or executive changes expected during the restructuring, according to Previte. He added that the company is not actively seeking new financing, and has $40 million in available capital in the bank. “It’s business as usual,” he said.
PMGI Holdings Inc. and 38 other affiliates were also listed in the filing, but Previte explained that their inclusion was a mechanical move to allow the filing to go forward in the state of Delaware.
FriendFinder was delisted from the NASDAQ exchange on Aug. 7 and is trading on the OTCQB Marketplace where shares rose 1 cent yesterday to 33 cents.