Distressed retailer Party City seeks to cut debt with bond deal

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Party City Holdco Inc., the retailer that has been working with restructuring advisers to cut its approximately $2 billion debt load as social distancing scraps celebrations, is seeking approvals from creditors on a proposed 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 one of its bonds that would give them a mix of equity in the business and new notes, according to a Party City statement Friday. The deal would still need the approval of 98% of its bondholders before completion.

“The agreement announced today 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.

The deal, which the company said would cut its debt by about $450 million and raise $100 million of new capital, was struck with some holders of the company’s 6.125% notes due in 2023 and its 6.625% bonds due 2026. Bondholders would get:

  • Shares of Party City representing nearly 20% of outstanding common stock
  • About $100 million of new second-lien 10% notes due in 2026 that would be issued by a newly formed subsidiary
  • $185.0 million of variable rate senior secured notes due 2025 to be issued by the parent company

The company is also launching a rights offering and private placement that in all would raise about $100 million of new capital from the sale of 15% notes due 2025. That includes a private transaction with Barings to purchase $40 million of the first-lien notes.

Bloomberg News