Party City set to exit bankruptcy with $1 billion debt reduction - Reuters

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• Companies

• Party City Holdco Inc

Sept 6 (Reuters) - A U.S. bankruptcy judge on Wednesday approved Party City Holdco's Chapter 11 bankruptcy plan, which will cancel about $1 billion in company debt and turn all of its equity value over to the retailer's lenders.

Party City attorney Ken Ziman said at a court hearing in Houston that the party supplies retailer will emerge from bankruptcy as a stronger business, closing just a "handful" of its approximately 800 stores and preserving thousands of jobs.

U.S. Bankruptcy Judge David Jones signed off on the restructuring deal while acknowledging the poor outcome for individual shareholders whose shares will be wiped out. Party City simply could not repay all of its $1.4 billion in pre-bankruptcy debt and have money left over for shareholders, according to the judge.

"The math is what the math is," Jones told a shareholder who spoke up at the hearing. "It's one of those things where there simply is not an alternative."

Party City is estimated to be worth between $450 million and $750 million, the company's financial adviser Moelis & Co said in an Aug. 31 court filing.

The retailer filed for Chapter 11 bankruptcy in January, citing high inflation, lingering impacts of the COVID-19 pandemic, and difficulties sourcing helium for its party balloons.

Party City's bankruptcy plan will convert about $1 billion in pre-petition debt into equity shares and allow the company to emerge from bankruptcy with a new $562 million loan backed by its existing lenders. The company will raise additional cash by selling $75 million in new equity shares.

Party City's junior creditors, including unpaid trade vendors, will receive $3.5 million in cash plus Party City's share of a $5.6 billion class action settlement related to payment processing fees that credit card companies charged to retailers. Party City is expected to receive about $5 million from that settlement.

Reporting by Dietrich Knauth in New York and Granth Vanaik in Bengaluru; Editing by Nick Zieminski, Alexia Garamfalvi and Bill Berkrot

Our Standards: The Thomson Reuters Trust Principles.

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Party City set to exit bankruptcy with $1 billion debt reduction - Reuters
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