Party City Files Bankruptcy After Pandemic Recovery Falters

(Bloomberg) — Party City Holdco Inc. is looking for bankruptcy protection, a final blow for the retailer that struggled to rebound after sales plummeted throughout the pandemic.

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The firm filed for Chapter 11 bankruptcy within the Southern District of Texas on Tuesday, court documents show. It reached a plan with holders of greater than 70% of its first-lien secured notes that may see it cut debt and shed leases, based on a press release.

Chapter 11 filings allow an organization to maintain operating while it really works out a plan to repay creditors. The creditor group has agreed to supply $150 million to assist the corporate fund itself in bankruptcy.

The corporate’s restructuring plan, which is subject to court approval, calls for the secured bondholders to swap their holdings for equity within the reorganized company. Existing stock might be canceled, with no expected recovery for shareholders.

Party City listed assets of $1 billion to $10 billion and liabilities in the identical range in its petition. Some subsidiaries including units outside the U.S. and the corporate’s prized Anagram balloon business weren’t a part of the bankruptcy filing.

Garage Beginnings

The corporate’s beginnings will be traced to a garage within the suburbs of Recent York City, where predecessor Amscan Inc. imported and distributed party supplies starting in 1947, Chief Restructuring Officer David Orlofsky said in court papers. The corporate grew organically over several many years, then began acquiring other industry players and ultimately went public in 2015.

The Recent Jersey-based party supplies retailer was struggling even before Covid-19, hurt by competition from retailers selling a broader array of products like Inc. and Goal Corp. The pandemic added to strains as social distancing quashed the festivities which are the corporate’s lifeblood.

The corporate faced other hurdles, too: As one among the biggest purchasers of helium within the US — much of which is produced in Russia — a shortage of the gas weighed on Party City’s bottom line. The mix of Covid-19, supply chain issues, wary consumers and inflation “ultimately proved to be greater than the corporate could bear,” Orlofsky said.

The corporate swapped debt and refinanced to purchase itself time to bounce back throughout 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 greater than 800 retail stores. The corporate is analyzing the performance of its stores and will close some throughout the bankruptcy, based on 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 starting in paragraph six.)

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