Party City Holdco Inc. (PCHI) has filed for Chapter 11 bankruptcy protection and entered into an agreement with an ad hoc group of holders of more than 70% of its senior secured first lien notes, with the purpose of supporting an expedited restructuring that would substantially reduce the retailer’s debt. The company is aiming to continue its usual operations during the restructuring process.
Additionally, PCHI has secured a $150 million bankruptcy loan and will seek approval from the U.S. Bankruptcy Court in the Southern District of Texas to use some of the funds to pay wages and vendors, among other expenses.
“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,” said Brad Weston, CEO of PCHI in a statement. “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.”
PCHI had reached out to its creditors for additional liquidity in early Dec. 2022, noting that it had $121.5 million of liquidity available at the end of Q3 2022, including about $92 million of availability under asset-based credit lines, against nearly $1.8 billion in debt. The retailer is aiming to manage this period of low liquidity by cutting costs by $30 million, including reducing the corporate workforce by 19%.
The filing comes less than a month after the Securities and Exchange Commission warned Party City that it is at risk of being delisted by the New York Stock Exchange due to its failure to maintain an average $1 per share stock price over a 30-day period.