Penthouse Publisher FriendFinder Networks Files For Bankruptcy

(RTTNews) - FriendFinder Networks Inc. (FFNT.OB), publisher of the Penthouse magazine, said Tuesday it has filed for voluntary Chapter 11 bankruptcy to implement an agreement that it reached with key stakeholders to reduce its debt as well as strengthen its balance sheet.

FriendFinder, which also runs social networking websites including AdultFriendFinder.com, expects the plan that it has reached with its key stakeholders to reduce its annual interest expense by over $50 million, eliminate about $300 million of secured debt, and return control of the company to its founders.

The company said that along with certain of its U.S. subsidiaries, it filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code with the U.S. Bankruptcy Court for the District of Delaware.

FriendFinder expects to file a plan of reorganization and disclosure statement, containing the terms of the transaction support agreement, later in September. The transaction support agreement contemplates that the plan of reorganization will become effective by January 31, 2014.

Anthony Previte, Chief Executive Officer of FriendFinder Networks said, "The agreement with the overwhelming majority of our noteholders will allow FriendFinder Networks to refinance our long-term debt, permit us to reinvest in our business, and position some of the strongest brands in the market for additional growth. The agreement comes at a time when our flagship brands are continuing to perform well and the operational efficiencies we previously put in place are taking hold."

According to the company, entities holding more than 80 percent in principal amount outstanding of both the 14 percent senior secured notes due 2013 as well as the 11.5 percent non-cash pay secured notes due 2014 have signed the transaction support agreement. In addition, all the holders of the 14 percent cash pay secured notes due 2013 as well as FriendFinder's largest shareholders have agreed to support the transaction under a separate agreement.

The transaction contemplates that the 14 percent senior secured notes due 2013 will be exchanged for new notes in the same principal amount, plus certain additional consideration in the form of cash or notes.

Holders of the 11.5 percent non-cash pay secured notes due 2014 as well as the 14 percent cash pay secured notes due 2013 will receive substantially all of the new common stock to be issued by the reorganized company, in addition to cash consideration subject to certain conditions.

Previte noted that the Chapter 11 filing was the most efficient and cost-effective way for FriendFinder to implement the transaction support agreement while continuing to operate its business.

FriendFinder's current common stock will be extinguished once the agreement becomes effective and will no longer trade on the open market. The company also said it has already filed a variety of customary first-day motions with the bankruptcy court, including requests to continue paying employee wages and benefits without interruption.

FriendFinder is being advised by the law firm of Greenberg Traurig LLP and financial advisor SSG Capital Advisors, LLC.

FFNT.OB closed Monday's trading at $0.33, up $0.01 on a volume of 34,900 shares.