Party City files for bankruptcy to restructure debt


A party town in Clifton, NJ, on January 16, 2023.

TBEN | Mike Calia

Retailer Party town has filed for bankruptcy protection in Chapter 11, toppled by heavy debt as inflation hits consumers’ pockets and dents sales.

The company said Wednesday it has entered into an agreement to reduce its debt and has already received backing from a group that owns more than 70% of its first lien to move forward with its bankruptcy plan, according to court documents and a filing with the US Securities and Exchange Commission.

Party City has secured a $150 million bankruptcy loan and will seek approval on Wednesday from the U.S. Bankruptcy Court in the Southern District of Texas to use half of that money to pay wages and vendors immediately, among other things.

The bankruptcy filing, which was filed late Tuesday, comes as consumers come under pressure and the retailer’s debts continue to weigh on the company. As of Sept. 30, the company said it was $1.67 billion in debt, with $122 million of available liquidity, consisting of $30 million in cash and $92 million in available revolvers.

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Brad Weston, CEO of Party City, noted during the company’s latest earnings call in November that a more challenging economic climate was discouraging shoppers from freely spending money on parties.

To get through the more difficult period, Weston told investors that Party City would work to reduce costs by $30 million. He said this would, among other things, reduce the company’s workforce by 19%.

CFO Todd Vogensen said his goal of $30 million in annual savings would help improve the company’s financial position “as we navigate what could be a challenging macro environment in 2023.”

In a court statement, David Orlovsky of consulting firm AlixPartners, the company’s chief restructuring officer, noted that “continued and historic inflationary pressures and a declining share price” led the company and its team of advisors to proceed with the restructuring under bankruptcy so that they can restore their balance sheet and avoid liquidation.

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In addition to mounting debt, the company is struggling to keep up with changing consumer behavior, especially with the increasing dominance of e-commerce and chain stores.

“They’re competing with Walmart, and Target and Amazon and the dollar stores and supermarkets,” said Joe Feldman, an analyst at Telsey Advisory Group who had followed Party City since going public in 2015. “They try the car while it’s still on the highway and everyone else around it is going so fast.”

Feldman stopped reporting on Party City on December 30 over concerns that the struggling company would go out of business.

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Supply chain issues in the Covid era and higher freight costs exaggerated the party store’s problems, but business already started to decline in 2019 as the company struggled to adapt to online shopping and faced a shortage of helium which put a dent in their best-selling product, balloons.

“They weren’t upgrading that fast. The business was slower. You’ve got to deal with a few external events and again, here we are. It’s just been an erosion over the past few years,” Feldman said.

Shares of Party City rose 10% premarket on Wednesday and were halted. As of Tuesday’s close, shares were trading for just 37 cents and the company’s market value was about $42 million.

—Melissa Repko of TBEN contributed to this report.

This is the latest news. Check back later for updates.


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