Party City Holdco Inc. (the “Company” or “Holdco”) today announced
the commencement of offers to exchange (the “Exchange Offers”) any
and all of the outstanding $350,000,000 aggregate principal amount
of existing unsecured 6.125% Senior Notes due 2023 (the “2023
Notes”) and $500,000,000 aggregate principal amount of existing
unsecured 6.625% Senior Notes due 2026 (the “2026 Notes” and,
together with the 2023 Notes, the “Existing Notes”) issued by its
wholly-owned subsidiary Party City Holdings, Inc. (“Holdings”) for:
(i) shares of common stock of the Company, par value $0.01 per
share (the “Common Stock”), representing up to 19.90% of the
outstanding Common Stock at the Expiration Time, as defined below,
(the “Exchange Shares”); (ii) 5.00% Cash/PIK / 5.00% PIK Senior
Secured Second Lien Notes due 2026 (the “Second Lien Anagram
Notes”) to be co-issued by Anagram Holdings, LLC, which is to be
formed as a wholly owned subsidiary of Holdings (“Anagram LLC”),
and Anagram International, Inc., an existing Minnesota corporation,
which shall become a wholly owned subsidiary of Anagram LLC upon
the consummation of the Refinancing Transactions (as defined below)
(“Anagram” and, together with Anagram LLC, the “Anagram Issuers”);
(iii) Floating Rate Senior Secured First Lien Notes due 2025 (the
“First Lien Party City Notes”) to be issued by Holdings and (iv) a
Subscription Right (as defined below).
Concurrently with the Exchange Offers, the Company commenced
consent solicitations (the “Consent Solicitations”) whereby the
Company is soliciting consents (“Consents”) from eligible holders
to certain proposed amendments to the indentures governing the
Existing Notes (the “Existing Indentures”) to, among other things:
(i) allow for the issuance of the First Lien Anagram Notes (as
defined below), the Second Lien Anagram Notes and the First Lien
Party City Notes; (ii) allow for the issuance of the Exchange
Shares; (iii) eliminate substantially all of the restrictive
covenants and certain events of default and related provisions
contained in the Existing Indentures; (iv) waive any related
cross-defaults under the Existing Indentures; (v) release any
guarantees provided by guarantors (or groups of guarantors) under
the Existing Indentures that do not constitute Significant
Subsidiaries (as defined in the Existing Indentures); (vi) prohibit
the designation of any future guarantors under the Existing
Indentures; and (vii) waive any requirement to use excess
proceeds from any previous asset sales to make an offer to
repurchase the Existing Notes under the asset sales covenant.
Concurrently with, and related to, the Exchange Offers and the
Consent Solicitations, the Company is conducting a rights offering
(the “Rights Offering”) in which certain eligible holders of
Existing Notes will have the opportunity to purchase up to $41.5
million aggregate principal amount of First Lien Anagram Notes (the
“Rights Offering Securities”). In the Rights Offering, subject to
the terms and conditions set forth herein, each eligible holder of
Existing Notes will have the right (the “Subscription Right”), but
not the obligation, to subscribe for $48.82 aggregate principal
amount of 10.00% Cash / 5.00% PIK Senior Secured First Lien Notes
due 2025 (the “First Lien Anagram Notes”) to be issued by the
Anagram Issuers, for each $1,000 principal amount of Existing Notes
validly tendered in the Exchange Offers (such dollar amount, the
“Purchase Price”). The Purchase Price for the Rights Offering
Securities shall equal 100% of the principal amount of the First
Lien Anagram Notes being purchased as Rights Offering Securities,
or $1 for each $1 of the principal amount of Rights Offering
Securities being purchased. Only eligible holders that validly
tender (and do not validly withdraw) at least $5,121,000 aggregate
principal amount of Existing Notes for exchange in the Exchange
Offers prior to the Early Participation Time (as defined below)
will be provided a Subscription Right; provided, however, that a
Backstop Party (as defined below) may tender in any amount. As a
result, the minimum Purchase Price of Rights Offering Securities
for non-Backstop Parties will be $250,000.
On June 26, 2020, the Company entered into a backstop and
private placement agreement (as amended, restated or otherwise
modified in accordance with its terms, the “Backstop and Private
Placement Agreement”) with certain backstop commitment parties
(collectively, in such capacity, the “Backstop Parties”) and
certain private placement commitment parties (collectively, in such
capacity, the “Private Placement Parties”), whereby (i) the
Backstop Parties have agreed, pursuant to the Exchange Offers, to
validly tender all of their respective Existing Notes on or prior
to the Early Participation Time and, pursuant to the Rights
Offering, to fully subscribe and duly purchase all Rights Offering
Securities such Backstop Parties are eligible to subscribe for on
or prior to the Early Participation Time (the “Subscription
Commitment”) and to additionally purchase any Rights Offering
Securities that remain unpurchased on the Settlement Date (as
defined below) of the Exchange Offers (the “Backstop Commitment”
and, together with the Subscription Commitment, the “Funding
Commitment”) and (ii) the Private Placement Parties have agreed to
purchase $58.5 million aggregate principal amount of First Lien
Anagram Notes on the Settlement Date (the “Private Placement
Commitment”) in a private offering (the “Private Placement”).
The Exchange Offers, the Consent Solicitations, the Rights
Offering and the Private Placement (collectively, the “Refinancing
Transactions”) are consistent with the terms set forth in the
previously announced Transaction Support Agreement (the “TSA”),
dated May 28, 2020, as subsequently amended, by and among the
Company, certain of its affiliates and certain holders of Existing
Notes. As of June 26, 2020, the holders of Existing Notes that are
party to the TSA (the “Consenting Noteholders”) collectively held
approximately 64.5% aggregate principal amount of the outstanding
Existing Notes, totaling approximately $548.4 million.
The following table sets forth the total consideration (the
“Total Consideration”) per $1,000 principal amount of Existing
Notes if validly tendered prior to or on the Early Participation
Time and the exchange consideration (the “Exchange Consideration”)
per $1,000 of Existing Notes if validly tendered after the Early
Participation Time and accepted for exchange in the Exchange
Offers:
Existing Notes to be Exchanged |
|
CUSIP |
|
Outstanding Aggregate Principal Amount (in
millions) |
|
Total Consideration Amount (per $1,000 Principal Amount of
Existing Notes Tendered Prior to the Early Participation
Time)(1) |
|
Exchange Consideration Amount (per $1,000 Principal Amount
of Existing Notes Tendered After the Early Participation
Time) |
|
|
|
|
|
|
|
|
|
6.125% Senior Notes due 2023 |
|
144A: 702150AC7 Regulation S: U70268AB0 |
|
$350.0 |
|
22.1481(2) shares of Common Stock, $117.65 principal amount of
Second Lien Anagram Notes, $217.65 principal amount of First Lien
Party City Notes and a Subscription Right(3) |
|
22.1481(2) shares of Common Stock, $112.65 principal amount of
Second Lien Anagram Notes and $212.65 principal amount of First
Lien Party City Notes |
|
|
|
|
|
|
|
|
|
6.625% Senior Notes due 2026 |
|
144A: 702150AD5 Regulation S: U70268AC8 |
|
$500.0 |
|
22.1481(2) shares of Common Stock, $117.65 principal amount of
Second Lien Anagram Notes, $217.65 principal amount of First Lien
Party City Notes and a Subscription Right(3) |
|
22.1481(2) shares of Common Stock, $112.65 principal amount of
Second Lien Anagram Notes and $212.65 principal amount of First
Lien Party City Notes |
____________________________
(1) |
Eligible holders of Existing Notes will only be eligible to receive
the Total Consideration if they validly tender (and do not validly
withdraw) their Existing Notes and deliver the related Consents at
or prior to the Early Participation Time. The Total Consideration
is inclusive of the Exchange Consideration. |
|
|
(2) |
Assuming all Existing Notes are
tendered and accepted in the Exchange Offers at or prior to the
Expiration Time, the maximum aggregate number of shares of Common
Stock issuable in connection with the Exchange Offers would
represent 19.90% of the number of shares of Common Stock
outstanding as of June 25, 2020. If the aggregate number of
outstanding shares of Common Stock increases prior to the
Expiration Time, the number of shares of Common Stock constituting
a portion of the Total Consideration and the Exchange
Consideration, as applicable, shall be adjusted at the same rate at
which such aggregate number of outstanding shares of Common Stock
increases prior to the Expiration Time. Any such increase of this
number of shares of Common Stock shall be promptly announced
through a press release. |
|
|
(3) |
Only eligible holders that
validly tender (and do not validly withdraw) at least $5,121,000
aggregate principal amount of Existing Notes for exchange in the
Exchange Offers prior to the Early Participation Time will be
provided a Subscription Right; provided, however, that a Backstop
Party may tender in any amount. As a result, the minimum Purchase
Price of Rights Offering Securities for non-Backstop Parties will
be $250,000. A Subscription Right will entitle recipients to
subscribe for $48.82 aggregate principal amount of Rights Offering
Securities for each $1,000 principal amount of 2023 Notes validly
tendered (and not validly withdrawn) in the Exchange Offers and for
$48.82 aggregate principal amount of Rights Offering Securities for
each $1,000 principal amount of 2026 Notes validly tendered (and
not validly withdrawn) in the Exchange Offers. |
In order to be eligible to receive the Total Consideration,
eligible holders must validly tender (and not validly withdraw)
their Existing Notes prior to 5:00 p.m., New York City time, on
July 10, 2020 (the “Early Participation Time”). The Exchange Offers
will expire at 11:59 p.m., New York City time, on July 24, 2020,
unless extended or earlier terminated (the “Expiration Time”).
Tendered Existing Notes may be validly withdrawn at any time prior
to the Early Participation Time, but not thereafter. The settlement
date for the Exchange Offers is expected to occur on or prior to
the fourth business day following the Expiration Time (the
“Settlement Date”). The Company may, but is not obligated to, at
any time and from time to time following the Early Participation
Time and prior to the Expiration Time, elect to provide for an
“early settlement” with respect to any Existing Notes validly
tendered for exchange (and not validly withdrawn) pursuant to the
Exchange Offers on or prior to the Early Participation Time,
provided that all conditions to the Exchange Offers have been
satisfied or waived by us. If the Company exercises such right,
such exercise shall be promptly announced through a press release,
in which case we would expect the date of the Early Settlement to
be on or prior to the fourth business day after the date of such
announcement.
Under no circumstances will eligible holders of Existing Notes
be entitled to receive any payment with respect to accrued and
unpaid interest on Existing Notes tendered in the Exchange Offers.
Holders of Existing Notes who do not tender for exchange or whose
Existing Notes are not accepted for exchange in the Exchange Offers
will continue to be paid interest according to the terms of their
Existing Notes.
Consummation of the Exchange Offers and the Consent
Solicitations is conditioned upon the satisfaction or waiver of the
conditions set forth in a confidential offering memorandum (the
“Offering Memorandum”). Such conditions include, among other
things, (i) the valid tender and acceptance by us of at least 98%
of the aggregate principal amount of Existing Notes in the Exchange
Offers (the “Minimum Condition”); (ii) the substantially concurrent
funding of $100.0 million of First Lien Anagram Notes pursuant to
the Rights Offering, the Backstop Commitment and the Private
Placement, as the case may be, including the satisfaction or waiver
of all applicable conditions to funding contained in the Backstop
and Private Placement Agreement; (iii) the receipt of the Consents,
without such Consents being validly revoked, in respect of at least
a majority of the outstanding principal amount of each series of
Existing Notes and execution and delivery of the supplemental
indentures to the Existing Indentures; (iv) the TSA being in full
force and effect, and all conditions required therein to be
satisfied being satisfied or waived in accordance with the terms
specified therein; and (v) the execution and delivery of certain
Intra-Company Agreements (as defined in the Offering Memorandum).
We may waive or amend any of these or any other conditions in
accordance with the TSA (including, with the approval of the
Required Consenting Noteholders (as defined in the TSA), the
Minimum Condition) or any other conditions to the consummation of
the Exchange Offers without providing additional withdrawal
rights.
Consummation of the Rights Offering is conditioned upon: (i) the
valid exercise of applicable Subscription Rights by eligible
holders participating in the Exchange Offers, the Consent
Solicitations and the Rights Offering prior to the Early
Participation Time, without any such exercise being revoked; (ii)
the substantially concurrent consummation of the Exchange Offers
and the Consent Solicitations; (iii) the substantially
concurrent consummation of the Private Placement; and (iv) the
substantially concurrent consummation of the purchase by the
Backstop Parties of any and all Rights Offering Securities not
subscribed and purchased in the Rights Offering.
Consummation of the Private Placement is conditioned upon, among
other things, the consummation of the Exchange Offers, the Consent
Solicitations and the Rights Offering, and subject to the terms of
the Backstop and Private Placement Agreement.
The Company is making the Exchange Offers, the Consent
Solicitations, and the Rights Offering only to eligible holders
through, and pursuant to, the terms of the Offering Memorandum.
None of the Company, the Consenting Noteholders, the financial
advisors, the transaction agent, the existing trustee, the trustee
and collateral trustees under the indentures governing the First
Lien Anagram Notes, Second Lien Anagram Notes and First Lien Party
City Notes or any of their respective affiliates takes any position
or makes any recommendation as to whether or not eligible holders
should tender their Existing Notes in the Exchange Offers, deliver
Consents pursuant to the Consent Solicitations or participate in
the Rights Offering, or whether or not the Private Placement
Parties should participate in the Private Placement.
The Exchange Offers and the Consent Solicitations may not be
consummated on the terms described in this press release or at all.
The Company is obligated, subject to the terms and conditions set
forth in the TSA, to consummate the Exchange Offers in accordance
with the terms of the TSA. The complete terms and conditions of the
Exchange Offers are set forth in the Offering Memorandum.
Only eligible holders may receive a copy of the Offering
Memorandum and participate in the Exchange Offers, the Consent
Solicitations and the Rights Offering. The Information and Exchange
Agent for the Exchange Offers and the Subscription Agent for the
Rights Offering is Epiq Corporate Restructuring, LLC (“Epiq”).
Holders of Existing Notes wishing to certify that they are eligible
holders in order to be eligible to receive a copy of the Offering
Memorandum should contact Epiq by emailing
Tabulation@epiqglobal.com and referencing “Party City” in the
subject line to request an eligibility letter.
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. The Exchange Offers are
being made in reliance on the exemption from registration provided
by Section 4(a)(2) of the Securities Act of 1933 (the “Securities
Act”), have not been registered with the SEC and rely on exemptions
under state securities laws.
The Exchange Offers and the Rights Offering are being made, and
the Total Consideration and the Exchange Consideration, as
applicable, are being offered, and will be issued only: (i) in the
United States, to holders of Existing Notes who are (x) “qualified
institutional buyers” (as defined in Rule 144A under the Securities
Act) or (y) institutional “accredited investors” within the meaning
of Rule 501(a)(1), (2), (3), (7) or (8) of Regulation D under the
Securities Act and (ii) outside the United States, to holders of
Existing Notes who are not “U.S. persons” (as defined in Rule 902
under the Securities Act) in reliance on Regulation S of the
Securities Act. The holders of Existing Notes who are eligible to
participate in the Exchange Offers and the Rights Offering pursuant
to at least one of the foregoing conditions are referred to as
“eligible holders.”
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. The Company 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 850 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 close the
Refinancing Transactions, (ii) the possibility that the
Refinancing Transactions are delayed or do 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”)and
those factors described in the “Risk Factors” section and elsewhere
in the Company’s Quarterly Report on Form 10-Q, both filed with the
Securities and Exchange Commission (the “Commission”), 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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