FriendFinder Networks Inc., the owner of Penthouse magazine and thousands of adult-oriented websites, won court approval to seek creditors’ votes on its restructuring plan, which would turn the company over to noteholders.
U.S. Bankruptcy Judge Christopher Sontchi in Wilmington, Delaware, today approved the company’s disclosure statement, a description of the reorganization plan.
The disclosure statement provides creditors with “all the information necessary to make an informed decision on whether to accept or reject the plan,” FriendFinder attorney Matthew L. Hinker said at the hearing.
FriendFinder will seek court approval of its reorganization plan to exit bankruptcy at a hearing scheduled for Dec. 16. Objections to the plan have to be filed by Dec. 9. The Boca Raton, Florida-based operator of websites such as adultfriendfinder.com sought bankruptcy protection Sept. 17 listing assets of $465.3 million and debt of $661.9 million.
The restructuring would cut about $300 million in debt and reduce annual interest expenses by about $50 million, according to a statement. The reorganized company’s estimated enterprise value was between $257.8 million and $285.4 million as of Aug. 31, according to the disclosure statement.
The reorganization plan is supported by about 78 percent of the holders of 11.5 percent non-cash paying second-lien notes and about 80 percent of the holders of 14 percent senior secured first-lien notes, court papers show.
The second-lien noteholders, owed about $330.8 million, would exchange debt for all of reorganized FriendFinder’s equity. The first-lien noteholders, owed about $234.3 million, would get cash and new notes. Current shareholders would receive nothing, according to court documents.
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.
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.
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.
The lead case is In re PMGI Holdings Inc., 13-bk-12404, U.S. Bankruptcy Court, District of Delaware (Wilmington).