Distressed retailer Party City may cut debt with bond deal

Bloomberg

Party City Holdco Inc, the retailer that has been trying to reduce its $2 billion debt load as social distancing scraps celebrations, will try to convince creditors to sign a deal that would trim its borrowings and inject fresh cash into the company.
The company reached an agreement with holders of more than 52% of its bonds that would give them a mix of equity in the business and new notes, according to a Party City statement. The deal would still need the approval of 98% of its bondholders before completion.
“The agreement demonstrates the confidence of certain of our bondholders in our strategy and leadership team, and we appreciate their support for our long-term success,” Chief Executive Officer Brad Weston said in the statement.
Party City has been working with restructuring experts from AlixPartners LLP to cut debt after poor Halloween sales and last year’s helium shortage, which cut into balloon sales. The Covid-19 pandemic hit the company in two ways: shutdowns across the country closed its retail outlets and prohibitions against gatherings may have cut demand for its products.
The company owns some of its stores and franchises others. A group of stores owned by a Party City franchisee in North Carolina filed bankruptcy, blaming the pandemic-related shutdown of businesses. No Party City owned store has filed bankruptcy, the company said.
The company did not say what would happen if it misses the 98% threshold, according to an email response to questions. “Party City has no plans to file for bankruptcy at this time, and the agreement with certain of the company’s bondholders does not contemplate a bankruptcy filing,” the company said.
The chain found a niche when it first opened in 1986, with its vast repositories of disco balls, streamers and Santa hats.
But its goods are now available online and at mass merchant competitors. Still, it
is bolstered by its wholesale business.