Party City announces exchange and consent bids for 2023, 2026 notes

Chicago, June 29 – Party City Holdco Inc. announced the beginning of an exchange offer for any and all of its 6 1/8% senior notes due 2023 (Cusips: 702150AC7, U70268AB0) and $500 million of its 6 5/8% senior notes due 2026 (Cusips: 702150AD5, U70268AC8), according to a press release.

The notes were issued by wholly owned subsidiary Party City Holdings, Inc.

The notes would be exchanged for:

• Shares of common stock of the company, par value $0.01 per share, representing up to 19.9% of the outstanding common stock at the expiration time;

• 5% cash/PIK / 5% PIK senior secured second-lien notes due 2026 to be co-issued by Anagram Holdings, LLC and Anagram International, Inc.;

• Floating-rate senior secured first-lien notes due 2026 to be issued by Anagram Holdings; and

• A subscription right.

Exchange details

Specifically, the 6 1/8% senior notes would be exchangeable, per $1,000 principal amount of notes, prior to the early participation time:

• 22.1481 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.

For noteholders who tender their 6 1/8% notes after the early participation time, they will receive:

• 22.1481 shares of common stock;

• $112.65 principal amount of second-lien Anagram notes; and

• $212.65 principal amount of first-lien Party City notes.

For the 6 5/8% notes, noteholders who tender by the early participation time will receive:

• 22.1481 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.

For noteholders who tender their 6 5/8% notes after the early participation time, they will receive:

• 22.1481 shares of common stock;

• $112.65 principal amount of second-lien Anagram notes; and

• $212.65 principal amount of first-lien Party City notes.

Consent solicitation

Concurrently with the exchange offer, the company is conducting a consent solicitation.

The company is seeking consents for amendments to the indentures governing the notes to:

• Allow for the issuance of first-lien Anagram notes, second-lien Anagram notes and first-lien Party City notes;

• Allow for the issuance of exchange shares;

• Eliminate substantially all of the restrictive covenants and certain events of default and related provisions contained in the existing indentures;

• Waive any related cross-defaults under the existing indentures;

• Release any guarantees provided by guarantors (or groups of guarantors) under the existing indentures that do not constitute significant subsidiaries;

• Prohibit the designation of any future guarantors under the existing indentures; and

• 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.

Rights offering

The company is also concurrently conducting a rights offering.

This would allow eligible holders of the notes an opportunity to purchase up to $41.5 million principal amount of first-lien Anagram notes.

Each eligible holder of existing notes will have the opportunity, not obligation, to subscribe for $48.82 aggregate principal amount of 10% cash / 5% PIK senior secured first-lien notes due 2025 for each validly tendered $1,000 principal amount of notes validly tendered in the exchange offers.

The purchase price for the rights offering securities shall be 100% of the face amount of the first-lien Anagram notes being purchased as rights offering securities, or $1 for each $ of the principal amount of rights offering securities being purchases.

Only eligible holders that validly tender 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 that a backstop party may tender in any amount.

As a result, the minimum purchase price of rights offering securities of non-backstop parties will be $250,000.

Backstop, private placements

On June 26, the company entered into a backstop and private placement agreement with certain parties and certain private placement commitment parties.

The backstop parties have agreed 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 the backstop parties are eligible for on or prior to the early participation time.

The backstop parties will additionally purchase any rights offering securities that remain unpurchased on the settlement date of the exchange offers.

Together with the subscription commitment and the funding commitment, the private placement parties have agreed to purchase $58.5 million face amount of first-lien Anagram notes on the settlement date in a private offering.

Transaction support note

Noteholders representing approximately 64.5% of the principal amount of the existing notes, totaling approximately $548.4 million are part of the early reported transaction support agreement.

The exchange offers, the consent solicitations, the rights offering and the private placement are all consistent with the terms in the agreement.

Exchange details

The early participation deadline is 5 p.m. ET on July 10.

The exchange offers will expire at 11:59 p.m. ET on July 24.

Settlement is expected for four business days following the expiration time.

The exchange offers and consent solicitations are conditioned upon the satisfaction or waiver of conditions including:

• The valid tender and acceptance of at least 98% of the aggregate principal amount of existing notes in the exchange offers;

• The concurrent funding of $100 million of first-lien Anagram notes under the rights offering, the backstop commitment and the private placement;

• The receipt of consents of at least a majority of the outstanding principal amount of each series of existing notes;

• The TSA being in full force and effect, and all conditions required therein to be satisfied; and

• The execution and delivery of certain intracompany agreements.

The rights offering is conditional upon:

• 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;

• The consummation of the exchange offers and of the consent solicitations;

• The concurrent consummation of the private placement; and

• The concurrent consummation of the purchase by the backstop parties.

Party City is an Elmsford, N.Y.-based supplier of decorated party goods.

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