FriendFinder Networks Inc., the owner of Penthouse magazine and thousands of adult-oriented websites, won court approval to use cash during its bankruptcy as it seeks to quickly execute a restructuring that would turn the company over to noteholders.
U.S. Bankruptcy Judge Christopher Sontchi in Wilmington, Delaware, today granted the company access to cash representing collateral for noteholders to help fund its operations. The Boca Raton, Florida-based operator of websites such as adultfriendfinder.com sought bankruptcy protection yesterday listing assets of $465.3 million and debt of $661.9 million.
The bankruptcy case will move at “a reasonable but aggressive pace,” Nancy A. Mitchell, a lawyer for the company, said at today’s hearing.
The restructuring deal is supported by holders of more than 80 percent of the company’s notes. Second-lien holders, with about $320.3 million in 11.5 percent non-cash paying notes and about $10.6 million in 14 percent cash-paying notes, will exchange debt for all of reorganized FriendFinder’s equity. The 14 percent senior secured first-lien noteholders, owed about $234.3 million, would get cash and new notes. Current shareholders would receive nothing.
“The relief granted today allows FriendFinder Networks to continue operating in the normal course of business as we pursue a financial restructuring that will reduce interest expense, eliminate debt, and strengthen our flagship brands,” Chief Executive Officer Anthony Previte said in a statement.
The restructuring would shed about $300 million in debt and cut annual interest expenses by about $50 million, according to the statement.
FriendFinder has more than 8,000 websites spanning more than 200 countries with more than 220 million members and over 750,000 paying subscribers, according to court papers. The websites offer social-networking and adult dating, video-sharing and live interactive video entertainment. In addition to publishing Penthouse magazine, the company licenses the brand for content such as pay-per-view programming.
The company hasn’t 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.
Sales decreased about 10 percent to $293.7 million for the fiscal year ended June 30. Revenue from social-networking websites dropped more than 17 percent while live interactive-video websites generated about 8 percent more.
FriendFinder raised about $50 million in a May 2011 initial public offering, selling shares for $10. The company was delisted from the Nasdaq Stock Market on Aug. 7. The shares closed today at 3.7 cents in over-the-counter trading.
The lead case is In re PMGI Holdings Inc., 13-bk-12404, U.S. Bankruptcy Court, District of Delaware (Wilmington).