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Penthouse publisher files reorganization plan

Penthouse magazine publisher General Media Inc. Tuesday filed a bankruptcy reorganization plan that will put a new group of creditors in charge of remaking a racy men's magazine hurt by newer rivals and Internet pornography.
/ Source: Reuters

Penthouse magazine publisher General Media Inc. on Tuesday filed a bankruptcy reorganization plan that will put a new group of creditors in charge of remaking a racy men's magazine hurt by newer rivals and Internet pornography.

Under the proposed plan, Penthouse's founder, Bob Guccione, would remain as the editorial force behind the publication in the new role of publisher emeritus for 10 years.

The proposed reorganization, which requires approval by the U.S. Bankruptcy Court for the Southern District of New York, would allow the company to emerge from bankruptcy by the end of February.

"Mr. Guccione will remain as publisher and the vision behind the magazine," said attorney Robert Feinstein of the law firm Pachulski, Stang, Ziehl, Young, Jones & Weintraub, which represents the company. "The new owners have a business plan that will maintain and continue the publications, as well as dramatically increase the company's presence in cable, Internet, video and so forth."

Penthouse, founded in 1965 as a competitor to Hugh Hefner's Playboy, has seen sales plunge in recent years to newer, more celebrity oriented men's magazines aimed at a younger audience. The magazine, known for its raunchy content, also has seen readers lured away by the explicit array of pornography on the Internet.

General Media, which is currently 99.5 percent owned by parent firm Penthouse International Inc. , filed for Chapter 11 bankruptcy protection in August. Penthouse International has not filed for bankruptcy.

Feinstein said an unidentified private equity investor bought the majority of the company's bonds from the previous creditors and is working with the company on the reorganization. The new bond holders "had been among the many people who had been looking to buy the company," he said.

In a statement, Guccione said he believes that "the continued publication of Penthouse is now ensured for many years."

Guccione resigned as chairman and chief executive of parent firm Penthouse International in November. At the time, the company said he was to remain editor-in-chief and publisher of the magazine.

Under the reorganization, Guccione will be paid $500,000 annually over the next 10 years as publisher emeritus, court filings show. His new "emeritus" title does not mean he will have any change in his duties at the magazine, Feinstein said.

"He is in his 70s and won't do this forever, but he will be doing this for the foreseeable future," Feinstein said. "It was intended to be an operating and honorary title at the same time."

The plan calls for holders of General Media's senior notes to get 1 million common shares of the reorganized company, which would be 100 percent of the outstanding stock.

The debt holders would also get up to $27 million in new term loan notes, the company said.