💰New Chapter 11 Bankruptcy Filing - Publishers Clearing House LLC💰
Nobody's a winner this time!
On April 9, 2025, Publishers Clearing House LLC (“PCH” or the “debtor”) claimed the grand prize of filing a chapter 11 bankruptcy case in the Southern District of New York (Judge Glenn).* Honestly, we were surprised to find out that this company still exists, and if you recognize it, congrats on being on the wrong side of – we’ll be generous – 35. For the rest of you, it’s best known “as the sweepstakes company whose famous Prize Patrol surprises winners on their doorsteps, presenting oversized checks ranging from $10,000 to Multi-Millions while TV cameras are rolling.”
Over the years, PCH has awarded over $500mm in prizes and, today, its sweepstakes “continue to attract millions of contestants, allowing PCH to generate revenue primarily through sales of curated digital advertising throughout its network of web and app-based entertainment platforms.” Never been on its “web and app-based entertainment platforms”? Yeah, we hadn’t either, but they look like this.
Like a time machine back to 2003.
Notwithstanding that, the site and apps apparently received upwards of 36mm visitors (though not necessarily unique) in ‘24. And through their clicks and thumb taps, “PCH is able to maximize ad revenue by offering attractive placements to advertisers,” which can “… target a specific demographic or affinity group,” although the PETITION team has serious reservations about there being any demographic groups beyond “the elderly.”
But before we get into the debtor’s bankruptcy, here’s first-day declarant and co-CRO William Henrich to set the stage:
“PCH’s business began when Harold Mertz, who had worked in the magazine business, created the opportunity for many magazine publishers to solicit subscribers to their titles through a single direct mail offer. Mertz called it a ‘car pool for publishers’ and it was almost immediately successful. The company’s first mailings were of 10,000 envelopes sent from the Mertz’ home on Long Island, New York, and offered 20 magazine subscriptions. The concept was simple. Should a consumer choose to order a title from the PCH mailing, magazine publishers would receive a portion of order revenue, and PCH would retain the rest as a commission on the sale. In addition, the magazine publishers would then have the ability to more economically contact consumers directly for renewal subscriptions. Having started in the basement of his home, Mr. Mertz often joked that there was no other way to go than up! And up the company did quickly rise. The concept took off, and the business profited by the efficiencies that it offered to the publishers.”
A long-winded way of saying Mr. Mertz was a pre-Internet spammer. 14 years later, in 1967, PCH began its first direct-mail sweepstakes, which “combined discounted magazine subscription offers with the opportunity” to win real cash prizes. And that too took off, and from the ‘60s through the ‘90s, “PCH was often recognized as one of the largest mailers in the country, second only to the IRS during tax season.”
But having winners win and seeing winners win are two different things, so in ‘89, PCH’s Prize Patrol started prowling the streets to scare the sh*t out of unsuspecting people capture the “joy and excitement” on their faces. The recordings were featured in TV commercials and “quickly became a cultural phenomenon, humorously referenced… ” [read: mocked] “…in popular shows such as Seinfeld, Saturday Night Live, Cheers, and numerous cartoons, TV shows, and movies.” Nevertheless the ads were a hit, and PCH cashed in by offering merch – “books, collectibles, coins, sports memorabilia, and home goods” – through its direct mail campaigns, which was another “major success.”
Fast forward a few more years, and by the late ‘90s and early ‘00s, PCH realized that the Internet was here to stay and acquired “search company Blingo in 2006, online gaming company Funtank in 2010, mobile marketing company Liquid Wireless in 2012, entertainment focused quiz content creator Topix in 2019, and digital publishers Wide Open Media in 2020,” and in ‘18, PCH’s revenue “came close to crossing the $1 billion mark.”
Finally, however, it hit a wall. This one specifically.
To get right to the core of it, PCH was a dinosaur mailing business at heart, and it didn’t stand a chance against Google on search or Amazon and Walmart on fast, free delivery on an “astonishingly wide range of products,” which only got worse in the COVID era.** Losses started in ‘22, and revenue fell off a cliff.
As a result, the debtor called it quits on its commerce division, which finalized closure at the end of ‘24. That shift has allowed it “to focus on new avenues of future growth and profitability, better aligned with its current strengths.” Those strengths? The geriatric-oriented “free-to-play, chance-to-win digital games and entertainment” noted ☝️, which generate ~$38mm in annual revenue – 4% of PCH’s all-time high.
In chapter 11, the debtor will be aiming to sell its assets to the highest bidder, although it doesn’t have a stalking horse or even bidding procedures on file. To fund the process, whenever it kicks off, there’s a $5.5mm DIP ($2.5mm interim), structured as a receivables purchase financing facility with factoring company Prestige Capital Finance, LLC, which features a variable discount fee on the A/R purchase price,*** a 1.50% facility fee ($82.5k) paid at closing, and a $7.5k early termination fee.
Outside of the DIP, PCH has minimal secured debt,**** and unsecured claims are split into two buckets: prize winners and everyone else. If you happen to be in the first bucket, like half of the debtor’s top 20 GUCs, it’s your (second) lucky day because the debtor requested and received authority to pay those liabilities as they come due. The other bucket is some $40mm, owed to employees, vendors, landlords, and service providers, and their fate will presumably turn on what plays out in the sale process.
The court held a first-day hearing on April 11, 2025. Prior to it, the US trustee objected to the debtor’s proposed notice of commencement because PCH didn’t want to send a mailing to any prize winner whose check was uncashed and owed less than $100, forcing those folks to rely on publication notice. But for sake of clarity, PCH admitted to having their addresses - all 97,120 of ‘em. And because the Bankruptcy Rules aren’t exactly ambiguous on this point, the court sustained the objection and tweaked the order. Judge Glenn also granted the remainder of requested relief unceremoniously – or say we’d guess, we know the orders were entered, but S.D.N.Y. hasn’t joined the rest of us in the 21st century by recording and then uploading the hearings. The second-day hearing is scheduled for May 1, 2025, by which point PCH will hopefully have a good idea of where it’s going and how it’s going to get there.
The debtor is represented by Klestadt Winters Jureller Southard & Stevens, LLP (Tracy Klestadt, Lauren Kiss, Stephanie Sweeney, Andrew Brown) as legal counsel, Getzler Henrich & Associates LLC (William Henrich, Laurence Sax) as financial advisor and co-CROs, and SSG Advisors, LLC as investment banker. Prestige Capital Finance, LLC is represented by Mandelbaum Barrett PC (Gary Kasnra, Vincent Roldan) as legal counsel.
*If you’re like us and Ed McMahon immediately came to mind, that’s the Mandela effect in action. He had no association with PCH whatsoever.
**In addition to being unable to compete with tech, PCH has also historically faced regulatory scrutiny from “state Attorneys General and Congress over consumers mistakenly believing that making purchases would improve their chances of winning sweepstakes.” However, they don’t appear to have been a primary cause of the bankruptcy, with settlements having been paid in 2000 (two for ~$52mm), 2010 ($3.5mm), and 2018 ($18.5mm) to avoid “the potential for protracted litigation, threats of injunctive efforts, and the company-wide distraction.”
***The discount starts at 1.65% if receivables are paid within 30 days and increases by 0.65% for each 10-day period thereafter (subject to a 90-day cap). If the aggregate amount of A/R assigned is less than $8mm during the term, an additional discount fee of 2% of the shortfall is applied.
****It’s limited to computer leases (secured by the computers) and a Long Island real estate lease (secured by personal property held there).
Company Professionals:
Legal: Klestadt Winters Jureller Southard & Stevens, LLP (Tracy Klestadt, Lauren Kiss, Stephanie Sweeney, Andrew Brown)
Financial Advisor and co-CROs: Getzler Henrich & Associates LLC (William Henrich, Laurence Sax)
Investment Banker: SSG Advisors, LLC
Claims Agent: Omni (Click here for free docket access)
Other Parties in Interest:
DIP Factor: Prestige Capital Finance, LLC
Mandelbaum Barrett PC (Gary Kasnra, Vincent Roldan)