(Bloomberg) — Party City Holdco Inc. is laying the groundwork for a bankruptcy filing within weeks that may end with creditors taking ownership of the retailer, according to people with knowledge of the situation.
(Bloomberg) — Party City Holdco Inc. is laying the groundwork for a bankruptcy filing within weeks that may end with creditors taking ownership of the retailer, according to people with knowledge of the situation.
The company will likely miss a coupon payment due in mid-February and could seek reprieve from its creditors to negotiate a restructuring, according to the people, who asked not to be identified because the matter is private.
A creditor group that includes Capital Group Cos Inc. and Silver Point Capital is having restructuring talks ahead of the potential filing, according to the people. The firms have sizable first-lien debt holdings and could be well-positioned to take control of the retailer in the event of a debt-for-equity swap, the people said.
Meanwhile, a debtholder group tied to the company’s Anagram business has not yet taken part in confidential negotiations, the people said. The creditors believe their collateral leaves them in line for healthy recoveries in a restructuring, they said.
The Wall Street Journal earlier reported that Party City is preparing a bankruptcy filing.
Known for selling balloons and other festive supplies, Party City has been hit hard by a helium shortage, costly shipping and softer demand amid an inflationary environment. Sales during the critical Halloween period disappointed investors.
The retailer has renewed discussions with creditors amid a dwindling cash pile and hefty debt burden, including a small slug of senior notes maturing in August 2023. It hired Moelis & Co., AlixPartners and Paul Weiss Rifkind Wharton & Garrison to explore options, including a capital raise.
A representative at Party City didn’t didn’t immediately respond to requests for comment. Capital Group and Silver Point declined to comment. Moelis didn’t provide a comment, while AlixPartners and Paul Weiss didn’t respond to messages.
As of the third quarter, Party City had about $92 million of cash available under its asset-based credit lines. That’s against nearly $1.8 billion of debt, which has been deemed unsustainable by S&P Global Ratings.
Its 8.75% first-lien notes due 2026 changed hands at around 31.8 cents on the dollar Thursday, according to Trace data. The stock is trading at about 16 cents, down from $6.55 a year ago.
–With assistance from Erin Hudson.
(Updates with company’s performance in sixth paragraph.)
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