Financial History
Penthouse’s parent company became General Media Inc in 1993 in connection with the company going public in December 21, 1993, in an $85 million United States Securities and Exchange Commission (SEC) registered bond offering. Jefferies and Company led the junk bond offering (Jefferies is a leading middle-market investment bank listed on the New York Stock Exchange). The main buyer of the bonds was the $40 billion MacKay Shields division of the venerable $143 billion New York Life insurance company.
The collateral for the bonds was primarily the registered trademarks of the company and other intellectual property, since the “Penthouse” brand is a worldwide recognized brand and would be difficult and expensive to recreate.
In 1997, Cerberus Capital Management began acquiring the General Media bonds in the open market. Cerberus is one of the largest hedge funds in the United States, with a reported $18 billion under management.
In an effort to raise cash and to reduce debt, Penthouse sold its portfolio of several automotive magazine titles in 1999 for $33 million cash to Peterson Automotive, the national automotive-publishing group. While these titles were successful, it is widely reported that the science and health magazines Omni and Longevity cost Penthouse almost $100 million, contributing to its eventual financial troubles.
Guccione and his trust remained the sole shareholder of General Media, according to SEC filings, despite the bondholder obligations. In October 2002, he agreed to take on his first minority shareholders in 37 years. Affiliates of Jason Galanis and Charles Samel acquired 15% of the company, according to SEC filings (affiliates later acquiring 100% in November 2003, according to filings). In October, 2002, General Media became a wholly owned subsidiary of Penthouse International (f/k/a American Pulp).
In May 2007, the SEC settled a suit brought against Galanis and Samel for alleged fraud and financial misreporting. In the settlement, no guilt was admitted, while the settlement resolves the SEC's accusations that General Media used an unauthorized electronic signature of Bob Guccione, the magazine's former chief executive officer, to meet Sarbanes-Oxley-law certification requirements in its 2003 first-quarter report.
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