Limp Penthouse files for Chapter 11

Magazine's August issue to be published despite the problems

NEW YORK — Downward-spiraling Penthouse has hit rock bottom. Barely two months after the U.S. Securities & Exchange Commission began investigating the company’s financial filings and its auditor quit, Bob Guccione’s crumbling empire has filed for Chapter 11 bankruptcy protection.

The announcement was made on Tuesday by General Media, a subsidiary of Penthouse Intl. and publisher of girly mag Penthouse.

Penthouse Intl. was not included in the filing, which was made by General Media in U.S. Bankruptcy Court in New York. The company closed on a $5 million debtor-in-possession credit line from secured bondholders.

To turn its books around, General Media has hired T. Scott Avila, a partner in Corporate Revitalization Partners, as chief restructuring officer.

Although the August issue of Penthouse will still be published, magazine employees in recent weeks reportedly have complained of receiving only 25% of their paychecks. And due to missed printing deadlines, no new issues of the mag appeared between late April and early July.

Penthouse shares closed unchanged on Tuesday at 85¢ on the over-the-counter board.