Party City gives final results of exchange offers, consent solicitation for 6 1/8%, 6 5/8% notes

Chicago, July 27 – Party City Holdco Inc. announced the expiration and final results of its 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.

Approximately 84.7% of the existing notes were tendered and accepted for exchange.

The company waived the minimum participation condition. Initially, the valid tender and acceptance of at least 98% of the aggregate principal amount of existing notes was needed for the exchange offers.

Specifically, $719.8 million principal amount of the existing notes, or 93.5% of the 2023 notes and approximately 78.6% principal amount of the 2026 notes, had been validly tendered for the exchange.

Approximately $19.9 million principal amount of first-lien Anagram notes had been subscribed for and accepted in the rights offering.

The company plans to issue $90.1 million principal amount of first-lien Anagram notes to certain backstop commitment parties and private placement commitment parties.

On the settlement date, the company will issue $110 million first-lien Anagram notes, $84.7 million second-lien Anagram notes, $161.7 million first-lien Party City notes and 15.9 million shares of common stock.

The company also announced that it received sufficient consents to effectuate the proposed amendments to each of the existing notes indentures.

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

The offer expired at 11:59 p.m. ET on July 24.

Settlement is expected for July 30.

The exchange

As previously reported, the notes will be exchanged for:

• Shares of common stock of the company, 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 were exchangeable, per $1,000 principal amount of notes, prior to the early participation time for:

• 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 the 6 5/8% notes, noteholders who tendered 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.

The terms originally varied for noteholders who tendered after the early participation time.

Consent solicitation

As previously reported, concurrently with the exchange offer, the company was conducting a consent solicitation. The consent solicitation was extended to 11:59 p.m. ET on July 24.

The company was 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 was also concurrently conducting a rights offering.

This allowed 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 had 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 $1,000 principal amount of notes validly tendered in the exchange offers.

The purchase price for the rights offering securities was 100% of the face amount of the first-lien Anagram notes being purchased as rights offering securities.

Only eligible holders that validly tendered at least $5,121,000 aggregate principal amount of existing notes for exchange in the exchange offers prior to the early participation time were 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 was $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 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 64.5% of the principal amount of the existing notes, totaling $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 exchange offers and consent solicitations were conditioned upon the satisfaction or waiver of conditions including:

• 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 was 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.

Epiq Corporate Restructuring, LLC was the information and exchange agent for the exchange offers and consent solicitations.

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

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