Huge twist in abrupt closure of 800-store national chain as bankruptcy was triggered by its own experts
A stunning twist has emerged in the bankruptcy of Party City, the beloved national chain that’s been a staple for nearly four decades.
On Friday, we reported that the party and craft retailer is closing all 850 stores in the coming weeks, with February 1 set as the final deadline for shutting down the business.
But it emerged this week the final nail in the coffin was self-inflicted.
The chain’s troubles began with an appraisal conducted by retail consultants Hilco Global, which Party City hired in September. The firm was tasked with assessing the value of Party City’s inventory – the products stocked in its stores and warehouses – as part of a plan to secure more financing.
Bosses had hoped to use a generous appraisal of the value of inventory – from costumes to party hats – would allow the retailer to borrow more money to shore up its finances.
However, in mid-November, Hilco’s preliminary report dealt a crushing blow to the business. It said that the value of Party City’s inventory had been ‘dramatically’ slashed compared to previous appraisals.
‘This basically means the appraisers thoughts that the various products on store shelves and piled up in warehouses was worthless tat,’ a retail expert told DailyMail.com. Since the expert has consulted with Party City, they asked not to be named.
This revelation over the plunge in value of stock was shared by Party City lawyer Christopher Hopkins during a US Bankruptcy Court hearing in Houston on Monday.
Party City is shutting down all its stores immediately, putting an end to nearly four decades of business
After the initial low valuation, Party City’s creditors, owed around $162 million, demanded the retailer set aside $50 million in reserve to cover loans.
This pushed the company closer to the brink, court papers show.
When a second appraisal was done by Hilco, the value of the company’s stock was raised but creditors opted to keep with their demands for a $50 million safety net.
The group of creditors took over the business when it first filed for Chapter 11 bankruptcy in 2023.
When the group were unwilling to plough in more investment and the company could not raise any more external funds the company had to take more drastic action.
This included stopping new inventory orders, delaying rent and vendor payments ceasing new inventory orders and delaying rent and vendor payments, according to court documents.
Although Party City managed to exit bankruptcy in September, by December 10, its cash pile had fallen below the $50 million reserve its lenders wanted, and it again filed for Chapter 11 bankruptcy.
Lenders ‘considered it essential to commence store closing sales before the Christmas and New Year’s selling season to maximize the proceeds of such sales for the benefit of all stakeholders,’ Party City Chief Restructuring Officer Deborah Rieger-Paganis said in a sworn statement to the bankruptcy court.
CEO Barry Litwin delivered the devastating news of the impending closures to employees on Friday during a video conference call, which was viewed by CNN.
It is a bleak time for US retailers as non-essential spending plummets due to soaring living costs.
Just this week, budget retailer Big Lots began an epic ‘going out of business’ sales as it prepares to close all locations
Meanwhile, America’s top department store Macy’s will close 65 stores within weeks.
Retail experts warn this could be just the beginning, with 2024 shaping up to see the highest number of store closures since the pandemic.
So far this year, US retailers have shut 7,300 stores – up nearly 60 percent from 2023.
The final nail in the Party City coffin appears to have been self-inflicted
The chain’s troubles began with an appraisal conducted by retail consultants Hilco Global
The New Jersey-based party supply giant is folding under financial pressure
CEO Barry Litwin delivered the devastating news of the impending closures to employees on Friday during a video conference call
Litwin – who was only announced as CEO four months ago – told corporate staff this was their final day on the job.
‘That is without question the most difficult message that I’ve ever had to deliver,’ Litwin said on the call.
Party City’s ‘very best efforts have not been enough to overcome’ flagging sales and rising costs – resulting in the company’s collapse.
‘It’s really important for you to know that we’ve done everything possible that we could to try to avoid this outcome,’ Litwin added. ‘Unfortunately, it’s necessary to commence a winddown process immediately.’
The New Jersey-based party supply giant, which once dominated the market with balloons, Halloween costumes, and decorations, is folding under the weight of competition from Amazon, Walmart, and pop-up rivals like Spirit Halloween.
Online shopping trends and a helium shortage also hit the company hard.
Party City, which was the largest party supply retailer in the U.S., employed around 6,400 full-time and 10,100 part-time workers as of 2021.
When Litwin took the helm in August he promised to strengthen Party City’s finances.
A cloud of uncertainty has hung over Party City since the company first filed for Chapter 11 bankruptcy in January 2023. It only exited in September.
Despite being saved from bankruptcy in 2023, the retailer never recovered
The company had wiped out $1 billion of its $1.7 billion debt. It also managed to keep the majority of its 800-plus stores open, though over 80 locations were shuttered between late 2022 and August 2024.
Party City – based in Woodcliff Lake, New Jersey – underwent a restructuring as lenders, including Monarch Alternative Capital and Silver Point Capital, took over and managed to clear around $1 billion of its debts, allowing about 850 shops to remain open.
Although some stores were saved, more than 60 had to close their doors, including five in Topeka, Kansas, Salina, New York, Joplin , Missouri and Owensboro, Kentucky, and most recently in Staten Island.
But the remaining $800 million debt proved too much.
Party City was successfully expanding before the pandemic and had sales of $2.35 billion in 2019, according to Forbes.
Overnight, its main customers – those hosting or attending parties – had no reason to shop at the store as social distancing was implemented.
As it emerged from the lockdowns it was plagued by supply chain issues, rampant inflation and increased competition.
At the time, the popular retailer was trading at just 40 cents on the stock exchange after once reaching nearly $23.
In addition to being set back since the pandemic, Party City has had to compete with other well-known retailers like Walmart and Target, and the occasion-based pop-up store, Spirit Halloween.
That pressure has intensified in an era of rising prices, including for helium used in party balloons, and slowing consumer demand.
‘Party City used to be one of the best games in town, but it is now something of an also-ran operation,’ Neil Saunders, managing director of Global Data Retail said last year.
