PARTY CITY HOLDCO INC. ITEM 1.01. Entry into a Material Definitive Agreement
Chapter 11 Filing
On
The Debtors continue to operate their business and manage their properties as
"debtors-in-possession" under the jurisdiction of the
Restructuring Support Agreement
On
The RSA contemplates a restructuring (the "Restructuring") of the Debtors pursuant to a prearranged joint plan of reorganization (the "Plan") carried out through the Chapter 11 Cases.
The RSA and the accompanying restructuring term sheet contemplate, among other
things:
• the entry into a debtor-in-possession financing facility with the
Consenting Noteholders in the amount of $150 million ;
• the (a) equitization of the Secured Notes in exchange for the equity of
the reorganized Company, subject to dilution by any Reorganized
Securities issued pursuant to the Rights Offering to be consummated at
emergence from the Chapter 11 Cases, the Management Incentive Plan, and,
to the extent applicable, the Reorganized Securities issued to lenders
who provide backstop commitments under the DIP Facility in consideration
for their backstop commitments or (b) such other treatment of the Secured
Notes as agreed by the Required Consenting Noteholders;
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• either repayment in cash upon emergence of the amounts outstanding under
the ABL Credit Agreement and the FILO Agreement (each as defined below)
. . .
Item 1.03 Bankruptcy or Receivership
The information set forth in Item 1.01 of this Current Report on Form 8-K under the caption "Chapter 11 Filing" is hereby incorporated by reference in this Item 1.03.
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation of an Obligation under an Off-Balance Sheet Arrangement
The filing of the Chapter 11 Cases constitutes an event of default that accelerated the Company's obligations under the following debt instruments (the "Debt Instruments"):
• the Asset-Based Lending Credit Agreement, dated as of August 19, 2015 , as
amended, by and among Party City Holdings Inc. and Party City
Corporation , as borrowers, PC Intermediate Holdings Inc. , as holdings,
and JPMorgan Chase Bank, N.A ., as administrative agent and collateral
agent (the "ABL Credit Agreement");
• the Asset-Based revolving credit facility on a first-in, last-out basis,
dated as of June 19, 2022 , by and among Party City Holdings Inc. and
Party City Corporation , as borrowers, PC Intermediate Holdings Inc. , as
holdings, and JPMorgan Chase Bank, N.A ., as administrative agent and
collateral agent (the "FILO Agreement");
• the indenture, dated as of July 30, 2020 , as amended, by and among Party
City Holdings Inc. , as issuer, certain guarantors party thereto and
Ankura Trust Company, LLC , as trustee pursuant to which Party City
Holdings Inc. issued $161.7 million in aggregate principal amount of
senior secured first lien floating rate notes due 2025;
• the indenture, dated as of February 19, 2021 , as amended, by and among PC
Intermediate Holdings Inc. , as issuer, certain guarantors party thereto
and Ankura Trust Company, LLC , as trustee pursuant to which PC
Intermediate Holdings Inc. issued $750 million in aggregate principal
amount of 8.750% senior secured first lien notes due 2026;
• the indenture, dated as of August 19, 2015 , as amended, by and among
Party City Holdings Inc. , as issuer, certain guarantors party thereto and
Wilmington Trust, National Association , as trustee pursuant to which
Party City Holdings Inc. issued $350 million in aggregate principal
amount of 6.125% senior notes due 2023; and
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• the indenture, dated as of August 2, 2018 , as amended, by and among Party
City Holdings Inc. , as issuer, certain guarantors party thereto and
Wilmington Trust, National Association , as trustee pursuant to which
Party City Holdings Inc. issued $500 million in aggregate principal
amount of 6.625% senior notes due 2026.
The Debt Instruments provide that as a result of the Bankruptcy Petitions, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce payment obligations under the Debt Instruments are automatically stayed as a result of the filing of the Chapter 11 Cases and the holders' rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
Employment Agreement with
The Amended Weston Agreement extends
In the event that
Key Employee Retention Awards
On
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grants for our named executive officers are payable in cash 50% upon the date of
the retention grant, and the remaining 50% of the retention grant will be
payable in cash following the conclusion of the Chapter 11 Cases. The aggregate
value of the Retention Awards granted under the retention program for all
participating employees is approximately
The executive's eligibility to receive a Retention Award is subject to continued employment with the Company through the payment dates. If an executive's employment is terminated with cause (as defined in the Retention Award) or resigns without good reason (as defined in the Retention Award), the executive will forfeit the right to receive any unpaid portion of the Retention Award and will be obligated to repay the Company the entire gross amount of any portion of the Retention Award previously paid to such executive. If an executive's employment is terminated due to death or disability, the executive will forfeit the right to receive any unpaid portion of the Retention Award but will not be obligated to repay any portion of the award previously paid to the executive. If an executive's employment is terminated by the Company without cause or the executive resigns for good reason, the executive will receive a prorated amount of the unpaid portion of the Retention Award based on the number of days elapsed since the effective date of the grant and the executive's termination. If an executive is terminated in connection with a change in control of the Company, the executive will receive any unpaid portion of the award. The Retention Award includes a requirement that the executive be bound by non-solicitation, non-disparagement and confidentiality restrictive covenants.
Restructuring Committee
In
Item 7.01 Regulation FD Disclosure
Press Release
In connection with the Chapter 11 Cases, the Company issued a press release on
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Cleansing Materials
Prior to the filing of the Chapter 11 Cases, the Company entered into confidentiality agreements (collectively, the "NDAs") with certain of the Consenting Noteholders as part of the RSA negotiations. Pursuant to the NDAs, the Company agreed to publicly disclose certain information, including material non-public information disclosed to such Consenting Noteholders (the "Cleansing Materials") upon the occurrence of certain events set forth in the NDAs. A copy of Cleansing Materials is attached to this Form 8-K as Exhibits 99.3 through 99.7.
The information in Cleansing Materials is based upon, among other things,
assumptions with respect to consumer demand for the Company's products,
operating expenses, cost of capital, and performance as set forth in Cleansing
Materials. Any financial projections or forecasts included in Cleansing
Materials were not prepared with a view toward public disclosure or compliance
with the published guidelines of the
The information included in this Form 8-K under Item 7.01 and Exhibits 99.2 and 99.3 through 99.7 is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to liabilities of that Section, unless the registrant specifically states that the information is to be considered "filed" under the Exchange Act or incorporates it by reference into a filing under the Exchange Act or the Securities Act of 1933, as amended.
Item 8.01 Other Events
Appointment of Chief Restructuring Officer
In
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Additional Information on the Chapter 11 Cases
Court filings and information about the Chapter 11 Cases can be found at a website maintained by the Company's claims agent Kroll at https://cases.ra.kroll.com/PCHI, by calling 888-905-0493 (toll-free) or +1 (646) 440-4580 (international), or by sending an email to PCHIInquiries@ra.kroll.com. The documents and other information available via website or elsewhere are not part of this Current Report and shall not be deemed incorporated herein.
Cautionary Note Regarding the Company's Securities
The Company cautions that trading in the Company's securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Trading prices for the Company's securities may bear little or no relationship to the actual recovery, if any, by holders of the Company's securities in the Chapter 11 Cases.
Cautionary Note Regarding Forward-Looking Statements
This Form 8-K includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Some of the forward-looking
statements in this Form 8-K can be identified by the use of forward-looking
terms such as "believes," "expects," "projects," "forecasts," "may," "will,"
"estimates," "should," "would," "anticipates," "plans" or other comparable
terms. Forward-looking statements speak only as of the date they are made and,
except for the Company's ongoing obligations under the
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibit
10.1 Restructuring Support Agreement among the Debtors and the Consenting
Noteholders, dated January 17, 2023 *
99.1 List of subsidiaries that are Debtors
99.2 Press Release, dated January 17, 2023
99.3 Lender Presentation
99.4 Intellectual Property Cross-License Agreement, by and between Party City
Holdings Inc. and Anagram International Inc. , dated as of July 30, 2020
99.5 Services Agreement, by and between Party City Holdings Inc. and Anagram
International Inc. , dated as of July 30, 2020
99.6 Supply Agreement, by and between Anagram International Inc. , Amscan Inc.
and Party City Holdings Inc. , dated as of July 30, 2020
99.7 Debtor-in-possession budget
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
* Exhibits and schedules have been omitted pursuant to Item 601(a)(5) of
Regulation S-K and will be provided on a supplemental basis to the Securities
and
exhibit have been redacted pursuant to Item 601(a)(6) of Regulation S-K. The
Company hereby undertakes to furnish supplementally an unredacted copy of the
exhibit upon request by the
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