NEW YORK (CNN/Money) -
Playboy Enterprises Inc., whose namesake magazine has been expanding into corporate-themed pictorials, wants to enter another corporate arena: the bond market.
Taking advantage of low borrowing costs, Playboy Enterprises said Wednesday it will sell $110 million in seven-year notes through a subsidiary, PEI Holdings Inc. It's the company's first-ever debt sale.
Chicago-based Playboy Enterprises (PLA: Research, Estimates), which went public in 1971, said it would use the money to repay bank loans, pay for an acquisition and finance "general corporate purposes."
The announcement from Playboy comes a week after the company said it's looking for female Starbucks employees to pose nude in an upcoming issue. Playboy, which says its namesake magazine has 10 million American readers, published "The Women of Enron" issue last year.
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A spokeswoman for Playboy Enterprises did not immediately return a call requesting details about the timing of the sale or what the notes might yield.
Standard & Poor's Wednesday assigned a 'B' credit rating to Playboy Enterprises. Moody's Investors Service rated the debt "B2." The ratings, six grades below "AAA," are considered junk-bond status.
But with the yield on the 10-year Treasury note near a four-decade low of 3.63 percent, the company will enjoy some of the lowest rates in years.
Moody's said its low rating reflects the company's "marginal profitability."
"During Playboy's recent operating history, there has been little free cash flow, given the difficult publishing climate and the start-up nature of the company's online businesses," said Moody's, which went on to list the risk of paper and postal expenses, competition and exposure to international economic volatility.
The company lost $4 million, or 16 cents a share, in the fourth quarter of 2002. That's narrower than the $11.7 million, or 47 cents per share, it lost in the same quarter of 2001.
Playboy magazine dates back to 1953, when founder Hugh M. Hefner published the first issue. In addition to publishing, Playboy has revenue form its adult Spice channel and the online site, Playboy.com.
Shares of Playboy fell 12 cents to $8.10 Wednesday.
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