Party City Holdco Inc. has made adjustments to its plan for emerging from bankruptcy after encountering challenges in meeting its financial projections. The party supply retailer has modified a key deal with its major lenders, offering them the option to be repaid in second-lien notes instead of cash. Additionally, creditors supporting Party City's exit from bankruptcy can now purchase a portion of the new notes alongside equity, rather than solely acquiring the company's stock.
To facilitate its restructuring, Party City intends to issue $232 million of new debt, which will be backed by the company's assets. Interest on this debt will be paid either in-kind or in cash at a rate of 12%, according to court documents.
The decision to revise the restructuring plan comes after Party City faced obstacles in its efforts to reduce its heavy debt load, a process that began in January. In June, the company's attorneys revealed that Party City had not met certain benchmarks outlined in its existing plan. Furthermore, the company's auditor ended their longstanding relationship with Party City after more than two decades.
The most recent financial projections show that Party City's year-over-year growth rate for comparable store sales has been revised downwards to -8.4% from the previous estimate of -2.5%, as stated in court papers. However, the company expects this metric to improve starting next year.
The voting deadline for approval of the revised plan is set for August 17, with a hearing to finalize the arrangement scheduled for August 24.