Party City files for bankruptcy to restructure piling debt

Party City and some of its U.S. units have filed for Chapter 11 bankruptcy, as the retailer looks to restructure its debt and better compete for sales as consumers’ wallets get hit by inflation.

The company struck an agreement on Tuesday to reduce its debt, according to a filing with the U.S. Securities and Exchange Commission. The retailer is asking the courts to grant “first day” relief, which will allow them to keep their doors open and pay vendors and their employees, court records state.

The filing comes as consumers fall under pressure and the retailer’s debt continues to weigh on the business. Comparable sales fell by 3.2% year over year in the most recent fiscal quarter, ended Sept. 30.

Key Halloween sales came in on the lower end of the company’s expectations and Party City’s CEO Brad Weston noted during an earnings call a more challenging economic environment was keeping shoppers from spending as freely on celebrations.

To manage through the tougher period, Weston told investors in November that Party City would work to cut costs by $30 million. He said that would include reducing its corporate workforce by 19%.

Party City tapped retail consultants AlixPartners in November as its financial advisor. In January, David Orlofsky, a managing director at the firm, became its chief restructuring officer.

Shares of Party City were up 10% and halted in premarket trading on Wednesday. As of Tuesday’s close, shares traded for just 37 cents and the company’s market value was about $42 million.

This is breaking news. Please check back for updates.