Party City Holdco Inc. (the “Company” or “PCHI”; NYSE: PRTY) today
announced a Transaction Support Agreement (the “TSA”) with holders
(the “Consenting Noteholders”) of more than 52% of the aggregate
principal amount of the 6.125% Senior Notes due 2023 (the “2023
Notes”) and the 6.625% Senior Notes due 2026 (the “2026 Notes” and,
together with the 2023 Notes, the “Existing Notes”). The
contemplated transactions (the “Transactions”) are expected to
deleverage the Company’s balance sheet by approximately $450
million and the Company intends to raise $100.0 million in new
capital to increase its financial strength and support PCHI’s
global operations and ongoing transformation initiatives.
Brad Weston, CEO, stated, “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.”
The TSA contemplates the following Transactions:
Exchange Offer
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.
Consent Solicitation
The Company will seek, and holders of Existing Notes who tender
pursuant to the Exchange Offer will be required to deliver,
consents to certain amendments to the indentures governing the
Existing Notes (together, the “Existing Indentures”) which, among
other things, will:
- allow for the Transactions;
- eliminate substantially all of the restrictive covenants and
certain events of default and related provisions contained in the
Existing Indentures and waive any related cross-defaults;
- release certain guarantees; and
- waive any requirement to use excess proceeds from any previous
asset sales to make an offer to repurchase the Existing Notes under
the provisions of the asset sales covenant in the Existing
Indentures.
Rights Offering for New Money First Lien Issuer Notes
Simultaneously with the launch of the Exchange Offer, the
Company will initiate a rights offering (the “Rights Offering”)
whereby certain holders will be provided the “right” to purchase a
pro rata portion of $50.0 million aggregate principal amount of
15.00% senior secured notes due 2025 (the “New Money First Lien
Issuer Notes”) to be issued by the Issuer. The New Money First Lien
Issuer Notes will be secured by first-priority liens on all the
assets of the Issuer and all of the Issuer’s capital stock, subject
to certain agreed upon exceptions.
Backstop Agreement and Private Placement Commitments
Certain of the Consenting Noteholders (as designated from time
to time, the “Backstop Parties”) have agreed in the TSA to, and
will, enter into a backstop agreement (the “Backstop Agreement”)
with the Company prior to launch of the Transactions, to purchase
$41.5 million (which the Company intends to increase to $50.0
million) of New Money First Lien Issuer Notes. As consideration for
entering into the Backstop Agreement and providing their respective
commitments, the Company has agreed to pay to each of the Backstop
Parties (i) its pro rata portion of an aggregate premium of $5.0
million in the form of New Money First Lien Issuer Notes plus (ii)
its pro rata portion of an aggregate premium of $5.0 million in the
form of First Lien Party City Exchange Notes.
On May 28, 2020, the Company and Barings LLC (including certain
funds or advisory accounts managed, advised or sub-advised by it,
“Barings”) entered into a private placement commitment agreement
(the “Private Placement Commitment Agreement”). The Private
Placement Commitment Agreement includes a commitment by Barings to
purchase $40.0 million New Money First Lien Issuer Notes in a
private transaction exempt from the registration requirements of
the Securities Act of 1933. The Company intends to obtain
commitments for additional $10.0 million New Money First Lien
Issuer Notes. As consideration for entering into the Private
Placement Commitment Agreement and obtaining additional
commitments, the Company will pay an aggregate premium of $5.0
million in the form of New Money First Lien Issuer Notes. Such
commitments are, or are expected to be, subject to certain
customary conditions.
Conditions to Closing
The closing of the Transactions contemplated by the TSA is
conditioned on the satisfaction or waiver of certain conditions
precedent, including finalizing all definitive documents and
achieving certain participation thresholds. Specifically, the TSA
requires the valid tender, without valid withdrawal, of a minimum
of 98.00%, or $833.0 million, of the outstanding aggregate
principal amount of Existing Notes by eligible holders as of the
expiration date of the Exchange Offer. These thresholds may be
lowered by the Company with consent of the Consenting
Noteholders.
The Company expects to commence the Exchange Offer in June.
Adjournment of Annual Meeting to July 2, 2020
The 2020 Annual Meeting of Stockholders will be convened as
scheduled on June 11, 2020 at 8:30 a.m. eastern daylight time and
will be immediately adjourned without conducting any other
business. The Annual Meeting will be reconvened and held virtually
on Thursday, July 2, 2020 at 8:30 a.m. eastern daylight time. By
holding the Annual Meeting on July 2, 2020, within the maximum time
prescribed by Delaware law, stockholders will have an opportunity
to receive additional information which may develop regarding the
Transactions. The record date of the Annual Meeting, April 14,
2020, remains unchanged.
During the pendency of the adjourned meeting, stockholders
holding shares as of the record date of April 14, 2020, who have
not yet voted, are encouraged to vote by 11:59 p.m. eastern
daylight time on July 1, 2020. Stockholders will also be able to
vote their shares electronically during the Annual Meeting.
Stockholders who have previously cast their votes do not need to
vote again.
The reconvened Annual Meeting will begin at approximately 8:30
a.m. eastern daylight time, at
www.virtualshareholdermeeting.com/PRTY2020, with online check-in
beginning at 8:20 a.m. on July 2, 2020. Ample time should be
allowed for the check-in procedures. In the event of difficulties
during the check-in time or during the reconvened Annual Meeting,
technical support at the number posted on the Annual Meeting log-in
page should be consulted.
Additional information regarding the TSA and the Annual Meeting
are disclosed in a Current Report on Form 8-K filed with the U.S.
Securities and Exchange Commission (“SEC”).
This communication is for informational purposes only and does
not constitute an offer to sell, or a solicitation of an offer to
buy, any security and does not constitute an offer, solicitation or
sale of any security in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal
counsel and Moelis & Company LLC is serving as financial
advisor to Party City. Milbank LLP is serving as legal counsel and
Houlihan Lokey Capital, Inc. is serving as financial advisor to the
Consenting Noteholders.
About Party CityParty City Holdco Inc. is the
leading party goods company by revenue in North America and, we
believe, the largest vertically integrated supplier of decorated
party goods globally by revenue. The Company is a popular one-stop
shopping destination for party supplies, balloons, and costumes. In
addition to being a great retail brand, the Company is a global,
world-class organization that combines state-of-the-art
manufacturing and sourcing operations, and sophisticated wholesale
operations complemented by a multi-channel retailing strategy and
e-commerce retail operations. The Company is the leading player in
its category, vertically integrated and unique in its breadth and
depth. Party City Holdco designs, manufactures, sources and
distributes party goods, including paper and plastic tableware,
metallic and latex balloons, Halloween and other costumes,
accessories, novelties, gifts and stationery throughout the world.
The Company’s retail operations include approximately 875 specialty
retail party supply stores (including franchise stores) throughout
North America operating under the names Party City and Halloween
City, and e-commerce websites, principally through the domain name
PartyCity.com.
Forward-Looking Statements This release
includes statements that constitute “forward-looking statements”
within the meaning of Section 21E of the Exchange Act and
Section 27A of the Securities Act. Forward-looking statements
relate to expectations, beliefs, projections, future plans and
strategies, anticipated events or trends and similar expressions
concerning matters that are not historical facts, such as
statements regarding our future financial condition or results of
operations, our prospects and strategies for future growth and the
development and introduction of new products. In many cases you can
identify forward-looking statements by terms such as “believes,”
“anticipates,” “expects,” “targets,” “estimates,” “intends,”
“will,” “may” or “plans” and similar expressions. These
forward-looking statements reflect our current expectations and are
based upon data available to us at the time the statements were
made. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from expectations for reasons, among others, including (i)
our ability to negotiate definitive documentation and launch the
Transactions, (ii) the possibility that the proposed
transaction is delayed or does not close, including due to the
failure to receive required participation by holders of the
Existing Notes, the inability to obtain required financing, or the
failure of other closing conditions, (iii) general financial
or market conditions, (iv) the availability of alternative
transactions, and (v) those factors described in the “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” sections and elsewhere in the
Company’s Annual Report on Form 10-K (“Annual Report”) filed
with the Securities and Exchange Commission (the “Commission”), and
the supplemental risk factor to our Annual Report filed May 8,
2020, on our Current Report on Form 8-K , as may be supplemented by
other reports the Company files with the Commission. Moreover, the
Company operates in a very competitive and rapidly changing
environment. New risks emerge from time to time. It is not possible
for management of the Company to predict all risks, nor can the
Company assess the impact of all factors on its business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements the Company may make. All
forward-looking statements are qualified by these cautionary
statements. The Company undertakes no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
ContactsInvestor
RelationsFarah Soi / Rachel
SchacterICR203-682-8200InvestorRelations@partycity.com
Media RelationsLeigh Parrish / Barrett Golden /
Andrew SquireJoele Frank, Wilkinson Brimmer
Katcher212-355-4449
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