Party City restarts talks with creditors as cash pile dwindles

Party City is renewing talks with creditors over liquidity needs with help from longstanding advisers, according to people with knowledge of the situation.

The retailer has been getting advice from Moelis & Company and law firm Paul Weiss Rifkind Wharton & Garrison, said the people, who asked not to be identified because the matter is private.

Known for selling balloons and other festive supplies, Party City has been squeezed by a helium shortage, costly shipping and consumers wary of rising prices. Sales during the critical Halloween period disappointed investors.

Party City has more than a dozen stores in Indiana, including three stores in Indianapolis and shops in Carmel, Fishers, Noblesville and Avon.

Party City had $121.5 million of liquidity available at the end of the third quarter, including about $92 million of availability under asset-based credit lines. That’s against nearly $1.8 billion of debt, including a small slug of notes due in August 2023.

Representatives at Party City, Moelis and Paul Weiss didn’t respond to requests for comment.

Party City’s first-lien notes due 2026 last changed hands at 38.75 cents on the dollar, according to Trace data. That’s down from 59.5 cents on Nov. 7, a day before the company reported third-quarter earnings.

Party City’s debt load is unsustainable, according to S&P Global Ratings, which downgraded the company deeper into junk territory last month. The retailer may default on its debt within the next year without effective cost-cutting measures, or if sales worsen more than expected, S&P said.

Last month, Chief Executive Officer Brad Weston said management intends to cut $30 million of costs by 2023, in part by reducing its workforce 19%. Party City completed a series of debt exchanges to create more financial breathing room during the early days of the pandemic.