Party City Holdco will get immediate access to $75 million of a $150 million debtor-in-possession loan the company sought under a voluntary Chapter 11 bankruptcy filing, a federal judge ruled Wednesday. A final hearing to consider Party City’s debtor-in-possession loan, at which time the remainder of the financing would become available to the retailer, is scheduled for Feb. 14.
The company filed for bankruptcy on Tuesday.
Judge David R. Jones of the U.S. Bankruptcy Court for the Southern District of Texas also approved a handful of other legal orders during the hearing. In summary, the judge’s decisions enable Party City to continue operating, to pay some pre-bankruptcy expenses, and to pay employees and suppliers in the near term.
The holding company has over 800 company-owned and franchised Party City stores. The company also operates seasonal Halloween pop-up stores. However, franchised stores, Anagram, a stand-alone balloon business, and subsidiaries outside the U.S. are not part of the bankruptcy case.
Party City’s core products are based on items that enhance birthday parties, graduations and holidays. But when the pandemic forced most people to cancel their in-person celebrations, events and gatherings, that affected the company’s bottom line. Around the same time, U.S. inflation hit record highs, which led people to reduce spending on discretionary items like party favors and balloons.
In messages published this week, the company assured customers, vendors and investors that it intends to stay in business and emerge from bankruptcy. But about 24 hours after the bankruptcy filing went public, the company faced another setback.
The New York Stock Exchange announced late Wednesday that Party City’s stock would be delisted as a result of the bankruptcy filing. “In reaching its delisting determination, NYSE Regulation noted the uncertainty as to the ultimate effect of this process on the value of the Company’s common stock,” the stock exchange said in a statement.
“NYSE Regulation also noted that the Company’s restructuring support agreement contemplates that the holders of the existing common stock of the Company will receive no recovery or distribution.” As a result, “trading in the Company’s common stock will be suspended immediately,” the NYSE said.
The company’s stock closed at 37 cents per share on Tuesday.
The NYSE notified Party City on Dec. 15 that its stock faced delisting after the company’s share price fell below $1.00 over a 30-day trading period. Party City, which traded under the ticker symbol PRTY, can request a review of the delisting decision.