The move will deleverage Party City’s balance sheet by $450 million, the company said. It also plans to raise $100 million of new capital.
Party City, Elmsford, N.Y., has been slammed by the coronavirus pandemic.
As part of the restructuring, holders of the company’s 2023 and 2026 notes will receive shares representing 19.9% of the common stock outstanding.
They will also receive $285 million of new notes.
As for the current notes, the agreement “eliminates substantially all of the restrictive covenants and certain events of default and related provisions” in the existing terms, Party City said.
Earlier this month, Retail Dive had cited the company as a bankruptcy risk.
“Party City still carries significant debt from a leveraged buyout, was hurt from a helium shortage last year that cut into its balloon sales, and had a frightfully bad Halloween period at its costume stores,” the publication stated.
“And then the pandemic hit, with its stay-at-home orders, canceled graduations and prohibitions against large gatherings. The sad truth is hardly anybody is partying right now. S&P downgraded the retailer in March, citing the pandemic and economic challenges on the horizon.”
Party City shares at last check jumped 57% to $1.60. The stock was trading a bit above $3 in early February and above $8 last June.
The company operates 875 specialty retail stores, including franchises), in North America under the names Party City and Halloween City.