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Is Party City Back After Debt Restructuring?

Party City Holdco Inc. (NYSE: PRTY) has announced that it will be restructuring its debt via an agreement with the current noteholders it is calling the Transaction Support Agreement (TSA). That helped lift shares as the week wound down.

Accordingly, Party City made the TSA with more than 52% of the aggregate principal amount of the 6.125% senior notes due 2023 and the 6.625% senior notes due 2026. The contemplated transactions are expected to deleverage the balance sheet by roughly $450 million.

Also, the company intends to raise $100.0 million in new capital to increase its financial strength and support its global operations and ongoing transformation initiatives.

According to the release:

An exchange offer in respect of the Company’s 2023 Notes and 2026 Notes in which, assuming full participation, participating holders will receive a combination of:

  • Shares of common stock of PCHI, representing 19.90% of such common stock outstanding on the settlement date;
  • $100.0 million aggregate principal amount of 10.00% senior secured notes due 2026 (the “Second Lien Issuer Exchange Notes”) to be issued by a newly formed limited liability company, a direct wholly owned subsidiary of Party City Holdings Inc. (“Holdings”), and Anagram International, Inc. (together, the “Issuer”). The Second Lien Issuer Exchange Notes will be secured by second-priority liens on all assets of the Issuer and its subsidiaries guaranteeing such notes and all of the Issuer’s capital stock, subject to certain agreed upon exceptions; and
  • $185.0 million aggregate principal amount of variable rate senior secured notes due 2025 (the “First Lien Party City Exchange Notes”) to be issued by Holdings and secured by first-priority liens on all assets of Holdings and its subsidiaries that currently secure the Company’s existing senior credit facilities.

CEO Brad Weston commented:

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. The transactions set out in this agreement deliver value to our stockholders and provide Party City a path to a significantly strengthened financial foundation as we continue to navigate the current macroeconomic challenges and implement our ongoing transformation initiatives.

Party City stock traded up about 33% on Friday to $1.36, in a 52-week range of $0.26 to $8.19. The consensus price target is $2.25.