Party City’s Chapter 11 bankruptcy plan, which will cancel about $1 billion in company debt, has been approved in court.
Reuters has reported that Party City attorney, Ken Ziman, said at a court hearing that the retailer will emerge from bankruptcy as a stronger business, and will close just a ‘handful’ of its 800 stores.
US bankruptcy judge, David Jones, signed off on the restructuring deal, while acknowledging the outcome for shareholders, who will have their shares wiped out. Party City didn’t have the funds to repay its $1.4 billion in pre-bankruptcy debt and have money for shareholders, according to the judge.
David Jones answered a shareholder question in court, by saying: “The math is what the math is. It’s one of those things where there simply is not an alternative.”
Party City’s bankruptcy plan will convert about $1 billion in pre-petition debt into equity shares and allow the company to emerge from bankruptcy with a $562 million loan, backed by existing lenders.
The retailer’s junior creditors, including unpaid trade vendors, will receive $3.5 million in cash plus Party City’s share of a $5.6 billion class action settlement which relates to payment processing fees that credit card companies charged to retailers.