(Bloomberg) — Party City Holdco Inc. is looking to borrow $150 million to $200 million from bondholders to fund it during a possible bankruptcy, according to people with knowledge of the situation.
(Bloomberg) — Party City Holdco Inc. is looking to borrow $150 million to $200 million from bondholders to fund it during a possible bankruptcy, according to people with knowledge of the situation.
It’s negotiating with holders of its first-lien bonds, a group that includes Capital Group Cos. Inc. and Silver Point Capital, for debtor-in-possession financing. Those investors are being represented by Davis Polk & Wardwell and Lazard, the people said.
Representatives for Party City and Davis Polk didn’t respond to requests for comment. Lazard, Capital Group and Silver Point declined to comment.
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.
Meanwhile, some of the biggest investors holding debt from the company’s valuable Anagram business haven’t yet taken part in confidential restructuring talks. It’s unclear if the subsidiary, which makes and distributes helium balloons, would be part of any bankruptcy filing, people said.
For the nine months through September 2022, Anagram booked $28.8 million of adjusted earnings, compared with roughly $51.6 million of adjusted earnings for the rest of Party City, company filings show.
The retailer has renewed discussions with creditors amid a dwindling cash pile and hefty debt burden, including a slug of senior notes maturing in August 2023. It’s been getting advice from Moelis & Co., AlixPartners and Paul Weiss Rifkind Wharton & Garrison.
Asset-based lenders and first-lien noteholders at the Anagram entity are projected to get somewhere around 91 cents on the dollar to 100 cents on the dollar in recovery, based on post-default earnings before interest, taxes, depreciation and amortization of $30 million, according to Fitch’s downgrade of the companies in November. Anagram became an unrestricted subsidiary of Party City, meaning it’s not part of its parent’s lending agreements, as part of Party City’s exchange offer and capital raise in 2020.
Party City’s 8.75% first-lien notes due 2026 reached an all-time low of 20.5 cents on the dollar on Tuesday, compared with about 30 cents toward the start of this month, according to Trace data. The stock is trading at 37 cents, down from $5.40 about a year earlier.
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