Editor’s note: This story was originally published on Sept. 7, 2023.
Update from Oct. 13, 2023 — Party City has officially emerged from Chapter 11 bankruptcy protection after eliminating nearly $1 billion in debt and plans to move forward with a fleet of nearly 800 stores. The retailer, which filed for bankruptcy in January 2023, has negotiated better lease terms and shuttered its less productive locations.
Having led the company through its restructuring, Brad Weston, CEO of parent company Party City Holdco, will step down effective Nov. 3, 2023. Sean Thompson, currently the company’s President and Chief Commercial Officer, will take the reins as interim CEO at that time.
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A bankruptcy judge in the Southern District of Texas has approved Party City’s plan to emerge from bankruptcy, multiple sources report. The plan, which will cancel $1 billion in company debt, will enable Party City to close just a “handful” of its nearly 800 stores and save thousands of jobs, Party City attorney Ken Ziman said at a court hearing in Houston, as reported by Reuters.
Ownership of the company will be turned over to the retailer’s current lenders, but the deal will wipe out individual shareholders. “The math is what the math is,” U.S. Bankruptcy Judge David Jones told a shareholder who spoke up at the hearing per Reuters. “It’s one of those things where there simply is not an alternative.”
Under the plan, $1 billion in pre-petition debt will be converted into equity shares, and Party City will receive a new $562 million loan from its existing lenders. The company also will raise additional cash by selling $75 million in new equity shares.
Party City’s junior creditors, including unpaid trade vendors, will receive $3.5 million in cash plus Party City’s share of a $5.6 billion class action settlement related to credit card payment processing fees, from which Party City is expected to receive about $5 million, according to Reuters.
Party City filed for bankruptcy in January 2023, citing “pandemic headwinds, a global supply chain crisis and macroeconomic challenges.” A month later the retailer closed 22 underperforming stores as part of its restructuring. While it was feared that more store closures would follow, most stores have remained open throughout the process and will continue to do so following the retailer’s emergence from bankruptcy.
“This plan sets the company up for success going forward,” said Ziman at the hearing as reported by Bloomberg. “And most important, your honor, this is a plan that preserves thousands of jobs.”
