Huge twist in abrupt closure of 800-store national chain as bankruptcy was triggered by its own experts

A stunning twist has occurred in the bankruptcy of Party City, the beloved national chain that has been a fixture for nearly four decades.

On Friday we reported that the festive and craft retailer will close all 850 stores in the coming weeks, with February 1 as the final deadline for the company to close.

But this week it turned out that the final nail in the coffin was self-inflicted.

The chain’s problems started with an appraisal conducted by retail consultant Hilco Global, which Party City hired in September. The company 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 a generous valuation of the value of its inventory – from suits to party hats – would allow the retailer to borrow more money to shore up its finances.

However, in mid-November, Hilco’s preliminary report delivered a crushing blow to the company. It said the value of Party City’s inventory had been reduced “dramatically” compared to previous appraisals.

“This basically means that the appraisers think the various products on store shelves and stacked in warehouses were worthless,” a retail expert told DailyMail.com. Because the expert consulted with Party City, they asked not to be named.

This revelation about the decline in stock values ​​was shared by Party City attorney Christopher Hopkins during a U.S. Bankruptcy Court hearing in Houston on Monday.

After the initial low valuation, Party City’s creditors, who were owed about $162 million, demanded the retailer put $50 million in reserve to cover loans.

This brought the company closer to the abyss, according to court documents.

When Hilco conducted a second appraisal, the value of the company’s stock was increased, but creditors opted to meet their demands for a $50 million safety net.

The group of creditors took over the company when it first filed for bankruptcy in 2023.

When the group was unwilling to make more investments and the company could no longer attract external funds, the company had to take more drastic action.

This included halting new inventory orders, deferring rent and vendor payments, halting new inventory orders and deferring rent and vendor payments, according to court documents.

Although Party City managed to emerge from bankruptcy in September, by December 10 its cash pile had fallen below the $50 million reserve its lenders wanted, and the company again filed for Chapter 11 bankruptcy.

Lenders deemed it essential to begin selling stores ahead of the Christmas and New Year’s sales to maximize proceeds from such sales for the benefit of all stakeholders, Party City Chief Restructuring Officer Deborah Rieger-Paganis said in an affidavit to the bankruptcy filing. court.

CEO Barry Litwin delivered the devastating news of the upcoming closures to employees during a video conference call on Friday viewed by CNN.

These are bleak times for US retailers, as non-essential spending plummets due to the rising cost of living.

Just this week, budget retailer Big Lots kicked off an epic ‘going out of business’ sale as it prepares to close all locations

Meanwhile, US department store Macy’s will close 65 stores within weeks.

Retail experts warn this could be just the beginning, with 2024 set to see the highest number of store closures since the pandemic.

So far this year, US retailers have closed 7,300 stores – almost 60 percent more than in 2023.

Litwin – who was only announced as CEO four months ago – told the company’s staff that this was their last day on the job.

“That’s without a doubt the hardest message I’ve ever had to deliver,” Litwin said during the call.

Party City’s best efforts have not been enough to overcome declining sales and rising costs – resulting in the company’s collapse.

“It is very important for you to know that we have done everything possible to prevent this outcome,” Litwin added. ‘Unfortunately, it is necessary to immediately start a reduction process.’

The New Jersey-based party supply giant, which once dominated the market with balloons, Halloween costumes and decorations, is buckling under the weight of competition from Amazon, Walmart and pop-up rivals like Spirit Halloween.

Online shopping trends and a helium shortage have also hit the company hard.

Party City, the largest party supplies retailer in the U.S., employed approximately 6,400 full-time and 10,100 part-time employees in 2021.

When Litwin took over 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 bankruptcy in January 2023. The company only left the company in September.

The company had wiped out $1 billion of its $1.7 billion debt. It also managed to keep the majority of its more than 800 stores open, although more than 80 locations were closed between late 2022 and August 2024.

Party City – based in Woodcliff Lake, New Jersey – underwent a restructuring when lenders including Monarch Alternative Capital and Silver Point Capital took over and managed to pay off about $1 billion of its debt, allowing about 850 stores to open to stay.

Although some stores were saved, more than 60 were forced to close, including five in Topeka, Kansas, Salina, New York, Joplin, Missouri, and Owensboro, Kentucky, and most recently in Staten Island.

But the remaining debt of $800 million proved too much.

Party City was successfully expanding before the pandemic and had revenue of $2.35 billion in 2019, according to Forbes.

Overnight, key customers – those hosting or attending parties – had no reason to shop in store as social distancing was introduced.

As the country emerged from lockdowns, it was plagued by supply chain problems, rampant inflation and increased competition.

At the time, the popular retailer was trading at just 40 cents, having once reached nearly $23.

In addition to falling behind since the pandemic, Party City has had to compete with other big-name retailers like Walmart and Target, and the occasional pop-up store Spirit Halloween.

That pressure has increased in an era of rising prices, including for helium used in party balloons, and declining consumer demand.

“Party City used to be one of the best games in town, but it’s now a runaway operation,” Neil Saunders, managing director of Global Data Retail, said last year.