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Seneca Financial Group to Pull Penthouse out of Financial Muck and Mire

Greenwich, Connecticut- Last week, James Sullivan’s Greenwich-based Seneca Financial Group Inc. was hired by the publisher of Penthouse magazine to help lift the struggling publication out of bankruptcy.

“We are excited about the opportunities for the company and are excited to be part of it moving forward,” said Sullivan, Seneca’s managing director.

A specialist in turnaround management, Seneca was named restructuring adviser to General Media, a subsidiary of Penthouse International Inc. and publisher of the racy men’s magazine, which filed for Chapter 11 bankruptcy protection in August.

Sullivan, who was named chief restructuring officer for the publishing company, has been running its day-to-day operations and the finances since mid-December. He will continue doing so until the Penthouse publisher successfully emerges from bankruptcy.

Seneca was officially retained by General Media last week when a U.S. Bankruptcy Court judge, who is hearing the case, approved the appointment.

According to Thomas Gugliotti, chairman of the Connecticut Bar Association’s commercial law and bankruptcy section, Seneca’s hiring means that the judge and the creditors in the case believe a turnaround is possible for Penthouse and in the best interest of the debtor and creditor.

“It is a very good device that is used in sophisticated bankruptcy cases,” said Gugliotti, who is a partner with the firm Updike, Kelly, Spellacy, where he chairs the office’s creditor’s rights group.

General Media, which publishes Penthouse as well as other magazines, filed for bankruptcy protection after struggling to pay off $40 million in debt and dealing with a drop in revenues by nearly half between 1998 and 2002.

Meanwhile, older competitors such as Playboy held market share and new men’s magazines such as Maxim have gained.

The publisher has submitted a plan for reorganization and today will go in front of Judge Stuart Bernstein, chief U.S. bankruptcy judge for the Southern District of New York, to submit its disclosure statement. Together, the documents detail how the company will pay creditors and remain a going concern.

General Media hopes to complete its restructuring and emerge from Chapter 11 by March, Sullivan said. Meanwhile, Sullivan will continue to run the company — helping it manage its finances, improve operations and “continue to get the various publications out the door,” he said.

Seneca, which was founded in 1993 by James Harris, who served as managing director and head of the Financial Restructuring Group at Lehman Brothers Inc., usually works in more of an advisory capacity than as a manager for a reorganization, Sullivan said.

The firm has often been a consultant with senior management of companies seeking to improve financial and operational difficulties. Clients have included Stamford-based Xerox Corp., Intel Corp., Federated Department Stores and America West Airlines.

However, the firm has managed turnarounds, most often in the telecom sector, said Sullivan, who has spent his career implementing turnaround plans for companies in manufacturing, financial services, real estate, environmental services and technology.

Seneca decided to take on this project largely because of the importance of the case.

“Penthouse is a globally recognized trademark . . . it deserves to be put back on the right track,” he said.



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