By Amelia Pollard and Jeremy Hill, Bloomberg
Party City Holdco Inc. is seeking bankruptcy protection, a final blow for the retailer that struggled to rebound after sales plummeted during the pandemic.
The firm filed for Chapter 11 bankruptcy in the Southern District of Texas on Tuesday, court documents show. It reached a plan with holders of more than 70% of its first-lien secured notes that will see it cut debt and shed leases, according to a statement.
Chapter 11 filings allow a company to keep operating while it works out a plan to repay creditors. The creditor group has agreed to provide $150 million to help the company fund itself in bankruptcy.
The company’s restructuring plan, which is subject to court approval, calls for the secured bondholders to swap their holdings for equity in the reorganized company. Existing stock will be canceled, with no expected recovery for shareholders.
Party City listed assets of $1 billion to $10 billion and liabilities in the same range in its petition. Some subsidiaries including units outside the U.S. and the company’s prized Anagram balloon business were not part of the bankruptcy filing.
The company’s beginnings can be traced to a garage in the suburbs of New York City, where predecessor Amscan Inc. imported and distributed party supplies starting in 1947, Chief Restructuring Officer David Orlofsky said in court papers. The company grew organically over several decades, then began acquiring other industry players and ultimately went public in 2015.
The New Jersey-based party supplies retailer was struggling even before Covid-19, hurt by competition from retailers selling a broader array of goods like Amazon.com Inc. and Target Corp. The pandemic added to strains as social distancing quashed the festivities that are the company’s lifeblood.
The company faced other hurdles, too: As one of the largest purchasers of helium in the US — much of which is produced in Russia — a shortage of the gas weighed on Party City’s bottom line. The combination of Covid-19, supply chain issues, wary consumers and inflation “ultimately proved to be more than the company could bear,” Orlofsky said.
The company swapped debt and refinanced to buy itself time to bounce back during the pandemic, but sales have lagged below pre-pandemic levels. In recent weeks, it began laying the groundwork for a bankruptcy filing, Bloomberg reported.
Party City reported revenues of $2.17 billion in 2021 and currently operates more than 800 retail stores. The company is analyzing the performance of its stores and may close some during the bankruptcy, according to court papers.
The case is Party City Holdco Inc., 23-90005, U.S. Bankruptcy Court for the Southern District of Texas.
With assistance from Andrew Monahan, Victoria Batchelor and Claire Boston.
(Updates with additional background beginning in paragraph six.)
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