Party City files for bankruptcy as it looks to restructure debt
Party City has filed for Chapter 11 bankruptcy protection amid pullback in consumer spending and higher prices due to inflation.
Party City Holdco Inc. has reached a pre-negotiated agreement with a bondholder group to support an "expedited restructuring" that would substantially reduce its debt and “optimize its capital structure and liquidity.” Under the terms of the restructuring support agreement, senior secured noteholders are proposed to become the new owners of the business. The ailing party goods company listed assets of $1 billion to $10 billion and liabilities in the same range in its petition.
Party City expects the restructuring to be completed in the second quarter. It has secured a commitment for $150 million in debtor-in-possession financing, subject to court approval, which it said would provide ample cash to continue operations.
“In the face of pandemic headwinds, a global supply chain crisis, and other macroeconomic challenges that have faced our industry, we have made significant strides in PCHI's ongoing transformation – establishing a solid foundation for long-term growth and continued success as the market leader in the celebrations space,” stated CEO Brad Weston. “Today's action to strengthen PCHI's balance sheet will bolster our ability to further advance our strategic priorities and continue to innovate and elevate the customer experience.”
The company said its more 800 Party City stores and e-commerce site remain open for the business during the proceedings. (Party City Holdco’s subsidiaries outside of the United States, its Party City franchise stores and its Anagram foil balloon business are not part of the Chapter 11 proceedings and will continue as core components of the PCHI enterprise.)
Party City’s filing comes as it has been struggling with soft sales and rising prices, as well as tight supplies of helium that cut into its balloon business. In November, the company said it would reduce its corporate workforce by 19% as part of a broader, $30 million cost-saving initiative.
The move came as the company said its core customer is facing “significant inflationary pressures” and Halloween sales results that, while up year-over-year, came in at the lower end of its expectations. Also in November, Party City tapped AlixPartners as its financial advisor. In January, David Orlofsky, a managing director at the firm, became its chief restructuring officer.
Total sales for its most recent quarter, ended Sept. 30, fell 1.6%, with a 3.2% declined in comp sales.
In December, Party City said it was at risk of a de-listing from the New York Stock Exchange because its stock fell under an average of $1 a share for 30 trading days.
AlixPartners, is serving as financial advisor, and A&G Realty Partners is serving as real estate advisor to the company.
Headquartered in Woodcliff Lake, N.J., PCHI operates across multiple businesses within its retail division and consumer products division. On the retail side, Party City operates than 800 company-owned and franchise stores as well as Halloween City seasonal pop-up stores.
The consumer products division includes design and manufacturing entities Amscan, a leader in celebration décor, tableware, costumes, and accessories, and Anagram, the global market leader in foil balloons.