By The Indianapolis Business Journal
INDIANAPOLIS — Party City on Wednesday received court approval to exit bankruptcy and emerge with a leaner balance sheet, avoiding the fate of retail peers who stumbled in Chapter 11 and ceased operations.
The New Jersey-based retailer is set to hand ownership of the company to lenders and reduce its debt load by some $1 billion, according to court papers. U.S. Bankruptcy Judge David R. Jones on Wednesday said he would approve the company’s restructuring plan.
“This plan sets the company up for success going forward,” Ken Ziman, an attorney for the company, said during the hearing. “And most important, your honor, this is a plan that preserves thousands of jobs.”
As part of the Chapter 11 process, the company closed more than 60 stores across the country, but was able to keep the vast majority of its more than 700 stores open, according to court papers. “It wasn’t a wholesale exiting of lease locations,” said Ziman.
Party City has three stores in Indianapolis: at 8703 Hardegan St. on the south side 10537 E. Washington St. on the east side and 3622 Bethany Road on the north side. It also has area stores in Carmel, Fishers and Avon, and a dozen other stores elsewhere in Indiana, including one in Columbus.
Among the stores to close this year was the Party City at Stony Creek Marketplace in Noblesville.
Other major retailers have not been so fortunate. Bed Bath & Beyond liquidated after failing to find a way to keep operating after Chapter 11. The story is similar for home goods retailer Christmas Tree Shops, while Jenny Craig opted to go straight into a liquidation after failing to find a rescuer.
The party supply purveyor has faced a litany of challenges since filing for bankruptcy in January. “There were obviously some trials and tribulations over the summer that the company has been able to overcome,” said Robert Feinstein, an attorney for the official creditor’s committee.
Among the obstacles it has faced: Party City’s longtime auditor unexpectedly quit in June, a move that was quickly followed by a disclosure that the company was preserving documents related to a Securities and Exchange Commission investigation. Party City also struggled to reach a final deal with some of its biggest lenders. In July, it had to rework its bankruptcy plan after struggling to meet financial projections.
Existing shareholders will be wiped out by the restructuring plan.
“When you do that waterfall, shareholders are unfortunately out of the money,” said Ziman during the hearing, referring to the repayment line in Chapter 11, in which equity holders are paid back last.