Party City, the well-known party supplies retailer, filed for Chapter 11 bankruptcy protection in the United States on Saturday. This marks the company’s second bankruptcy filing in just two years, signaling significant financial distress. The company plans to initiate a wind-down process, impacting both its retail and wholesale operations.
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40 Years of Celebration Ends in Liquidation
After more than four decades in business, Party City announced the closure of all 700 of its U.S. stores. While the stores will remain open during a going-out-of-business sale, the move signifies the end of an era for the retailer known for its wide selection of party supplies, ranging from themed decorations to Halloween costumes. The company, along with several subsidiaries, filed its Chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of Texas. Court documents reveal both assets and liabilities between $1 billion and $10 billion, with over 10,000 creditors involved.
Senior Lenders Provide Bridge Financing
Party City Holdco secured financial support from its senior lenders to maintain operations during the wind-down process. This funding will enable the New Jersey-based company to cover essential expenses while liquidating its assets. The timing of the bankruptcy filing, coinciding with the post-holiday season, is strategic. Retailers often utilize this period to leverage any remaining cash flow generated from holiday sales before initiating bankruptcy proceedings.
Employees Impacted by Closure
Despite the impending closure, Party City intends to retain a majority of its 12,000 employees throughout the liquidation process. These employees will play a crucial role in managing the going-out-of-business sales and facilitating the wind-down of operations across both physical stores and the company’s e-commerce platform. This retention aims to ensure a smooth transition for both customers and the business.
Previous Bankruptcy and Pandemic Challenges
This isn’t Party City’s first encounter with bankruptcy. The company previously filed for Chapter 11 protection in January 2023. A subsequent restructuring plan allowed Party City to emerge from bankruptcy later that year, eliminating approximately $1 billion in debt. However, the company continued to face significant headwinds stemming from the COVID-19 pandemic. Lockdowns, store closures, inventory shortages, and disruptions to the global helium supply chain—crucial for balloon sales—contributed to the retailer’s financial struggles.
Amscan Also Files for Bankruptcy
Adding to the complexity of the situation, Amscan, a subsidiary of Party City Holdco specializing in the design, manufacturing, and distribution of celebration products, also filed for bankruptcy on Saturday. This indicates the widespread financial challenges within the parent company’s portfolio. The simultaneous filings suggest a coordinated effort to address the financial distress across the related entities.
Conclusion: A Difficult Chapter Closes
Party City’s second bankruptcy filing and subsequent liquidation mark a somber conclusion for the once-thriving party supplies giant. The company’s struggles highlight the lasting impact of the pandemic and the challenges faced by retailers in a rapidly evolving market. While the going-out-of-business sales offer a final opportunity for customers to purchase Party City products, the closure represents a significant loss for both employees and the party supply industry.
