So far, the Union-based company has received a total of $360 million as part of a roughly $1 billion financing package aimed at helping it pursue a turnaround without a bankruptcy filing. The latest tranche of $135 million came just one week ago.
In a March 14 announcement, Bed Bath & Beyond said the terms of the equity offering agreement were amended to “further facilitate up to $100 million in additional financing in April 2023, for a cumulative total of $460 million to date.”
After closing an underwritten public offering in early February, the company said it secured $225 million upfront and anticipates an additional $800 million over the coming months.
Gove
In a statement, Bed Bath & Beyond Chief Executive Officer and President Sue Gove said, “The funding we have raised over the past month has supported our ongoing operations and enabled us to begin reinvesting in valuable inventory to fulfill customer demand.”
“We will consider thoughtful and essential actions that can enhance our business operations and accelerate results for customers, associates, suppliers and shareholders over the long term,” she added.
A month after filing for Chapter 11 bankruptcy protection, Party City Holdco Inc. is looking to shrink its retail footprint as part of an expedited financial restructuring.
In a Feb. 16 filing with U.S. bankruptcy court, the Woodcliff Lake-based operator of 800-plus stores said it is working with A&G Real Estate Partners to auction off leases for 12 underperforming locations in six states. In coming weeks, additional lease auctions will follow, with the total number of closures depending on the outcome of ongoing negotiations with landlords, according to A&G.
The first tranche – which range in size from 9,000 square feet to 28,000 square feet and are a mix of freestanding sites and stores in shopping plazas – includes locations in New York, Missouri, Michigan, Oregon, Oklahoma and West Virginia, A&G said.
In its court filing, Party City also identified 10 more leases that will be auctioned as part of the next phase, including one New Jersey location – in Woodland Park at McBride Lenox Plaza Shopping Center. The list also identifies stores in Texas, New York, Georgia, West Virginia, Louisiana, Michigan, Iowa and Illinois.
“Given the high cost of new construction in today’s marketplace, the lack of new development, and the strong attributes of many of these Party City locations, we expect good interest from local and regional tenants who see this as an opportunity to open in a fully built-out retail box and begin doing business within three months,” said Andy Graiser, co-president of A&G.
In addition to the initial 12 Party City leases being auctioned, A&G Real Estate Partners will be auctioning more Party City locations in the weeks ahead, the company said. – A&G REAL ESTATE PARTNERS
According to A&G, uses that have begun to show interest in the locations up for auction include dollar stores, gyms, local retail and specialty businesses, and medical practices.
The New York City-headquartered real estate advisory and services firm is also helping Party City evaluate its lease portfolio strategy as the retailer looks to reduce debt as well as optimize capital structure and liquidity.
“Our work on our lease portfolio is moving very quickly, with a plan for us to exit locations that do not meet the key financial metrics required for our go-forward fleet,” said Marc Ehle, Party City’s executive vice president of enterprise operations.
After Party City filed for bankruptcy in January, a federal judge granted immediate access to $75 million of $150 million debtor-in-possession financing, enabling the retailer to continue operating in the near term. The company also entered into a restructuring agreement with a bondholder group that will enable Party City to substantially reduce its $1.67 billion debt load.
The reorganization is expected to be completed in the second quarter of 2023, according to Party City. Its subsidiaries outside of the U.S., its franchise stores, and its Anagram business are not part of the bankruptcy proceedings.
In discussing the company’s most recent quarterly report in November, Party City Chief Executive Officer Brad Weston said inflationary pressures were continuing to impact consumers’ ability and willingness to spend money on celebrations. He also said inventory levels have been affected by ongoing supply chain woes in addition to helium shortages.
As of Sept. 30, 2022, Party City reported $1.67 billion in debt, with available liquidity of $122 million, made up of $30 million in cash and $92 million of revolver availability. For the third quarter of Fiscal Year 2022, Party City recorded total net sales of $502.2 million, a 1.6% decrease from Q3 2021.
Party City hasn’t yet reported its fourth quarter or 2022 full-year earnings.
Following flat sales during its crucial Halloween season, Party City went into cost-cutting mode, with the goal of trimming $30 million from retail store efficiencies in areas such as information technology, contracts, marketing, raw materials and professional services. Additionally, the company reduced its corporate workforce by 19% through a combination of position eliminations and leaving open positions unfilled, Weston said.
Founded 36 years ago in East Hanover, Party City is the largest retailer of party goods in the U.S., Canada and Mexico. It operates more than 900 company-owned and franchise outlets under the Party City, Halloween City, Toy City, Factory Card and Party Outlet brands. However, the company has struggled to keep pace with changing consumer behavior in recent years, particularly amid the growth of e-commerce and big box retailers.
Since 2019, the company has been working on large-scale changes, such as restructuring its debt and closing 55 stores. As of last month, the chain operated 823 stores, 770 of which were company-owned.
Editor’s note: This story was updated at 1:35 p.m. ET Feb. 20 clarify the order of the states that would see store closures.
A federal bankruptcy judge granted Party City Holdco Inc. immediate access to $75 million in debtor-in-possession financing, enabling the struggling retailer to continue operating in the near term.
As part of a Jan. 18 ruling from Judge David Jones in U.S. Bankruptcy Court for the Southern District of Texas, the Woodcliff Lake-based company will be able to cover some pre-bankruptcy expenses as well as pay employees and critical suppliers.
On Jan. 17, the party goods retailer announced it filed for Chapter 11 relief and entered into a restructuring agreement with a bondholder group that would allow the company to reduce its $1.67 billion debt load.
Party City – which reported liabilities and assets of $1 billion to $10 billion and 10,001 to 25,000 creditors – also asked the court to maintain “business-as-usual operations” to keep its 800-plus stores open, pay wages and benefits, and “honor customer programs and policies.”
On Jan. 17, Party City announced it filed for Chapter 11 relief and entered into a restructuring agreement with a bondholder group that would allow the company to reduce its $1.67 billion debt load. – MIKE MOZART VIA FLICKR
Additionally, the company said it has secured $150 million in debtor-in-possession financing and that the funding, which is subject to court approval, would be used to support operations.
A hearing to consider when the remainder of that debtor-in possession loan would become available to Party City is scheduled for Feb. 14.
Altogether, restructuring is expected to be completed in the second quarter of 2023, according to Party City. Its subsidiaries outside of the U.S., its franchise stores, and its Anagram business are not part of the bankruptcy proceedings.
Inflationary impacts
In a statement announcing the voluntary bankruptcy filing, Party City Chief Executive Officer Brad Weston said, “In the face of pandemic headwinds, a global supply chain crisis, and other macroeconomic challenges that have faced our industry, we have made significant strides in PCHI’s ongoing transformation – establishing a solid foundation for long-term growth and continued success as the market leader in the celebrations space. Today’s action to strengthen PCHI’s balance sheet will bolster our ability to further advance our strategic priorities and continue to innovate and elevate the customer experience.”
In discussing the company’s most recent quarterly report in November, Weston said inflationary pressures were continuing to impact consumers’ ability and willingness to spend money on celebrations.
As of Sept. 30, 2022, Party City reported $1.67 billion in debt, with available liquidity of $122 million, made up of $30 million in cash and $92 million of revolver availability.
For the third quarter of Fiscal Year 2022, Party City recorded total net sales of $502.2 million, a 1.6% decrease from Q3 2021. Meanwhile, adjusted loss for the period came in at $1.39 per share — wider than Wall Street analysts’ estimates of $0.10 per share.
To manage the difficult period, Weston said at the time that the company would trim costs by $30 million — savings that it expects to come out of retail store efficiencies, like information technology contracts, marketing expenses, professional services and raw materials, and a 19% reduction in corporate workforce.
Within 24 hours of Party City’s bankruptcy filing going public, the New York Stock Exchange announced the retailer’s stock would be immediately delisted.
The notification comes a month after Party City was warned by the NYSE that it was at risk of being delisted for failing to maintain an average $1 per share stock price over a 30-day trading period.
In a Jan. 18 statement, the stock exchange made its delisting determination based on “the uncertainty as to the ultimate effect of this process on the value of the company’s common stock.”
“NYSE Regulation also noted that the Company’s restructuring support agreement contemplates that the holders of the existing common stock of the Company will receive no recovery or distribution,” the statement added.
Following dwindling sales, Woodcliff Lake-based Party City Holdco Inc. (PCHI) filed for bankruptcy protection in an attempt to restructure its debt.
In a Jan. 17 notice, the party goods retailer announced it filed for Chapter 11 relief in the U.S. Bankruptcy Court for the Southern District of Texas and entered into a restructuring agreement with a bondholder group that will enable the company to substantially reduce its $1.67 billion debt load.
Party City also said it is asking the court to maintain “business-as-usual operations” to keep its 800-plus stores open, pay wages and benefits, and “honor customer programs and policies.”
Additionally, the company said it has secured $150 million in debtor-in-possession financing and that the funding, which is subject to court approval, would be used to support operations.
The restructuring is expected to be completed in the second quarter of 2023, according to Party City. Its subsidiaries outside of the U.S., its franchise stores, and its Anagram business are not part of the bankruptcy proceedings.
In a statement, Party City CEO Brad Weston said, “Today’s action to strengthen PCHI’s balance sheet will bolster our ability to further advance our strategic priorities and continue to innovate and elevate the customer experience.” – MIKE MOZART VIA FLICKR
In a statement, Party City Chief Executive Officer Brad Weston said, “In the face of pandemic headwinds, a global supply chain crisis, and other macroeconomic challenges that have faced our industry, we have made significant strides in PCHI’s ongoing transformation – establishing a solid foundation for long-term growth and continued success as the market leader in the celebrations space. Today’s action to strengthen PCHI’s balance sheet will bolster our ability to further advance our strategic priorities and continue to innovate and elevate the customer experience.”
Weston added, “As we take this important step to put our business on stronger financial footing for the future, we are as committed as ever to inspiring joy by making it easy for our customers to create unforgettable memories. We appreciate the commitment of our team members and the continued support of our partners as we further enhance our position as the ‘go to’ one-stop-shop for celebrating life’s special moments.”
Under pressure
During the company’s most recent earnings call in November, Weston said inflationary pressures were continuing to impact consumers’ ability and willingness to shell out more money on celebrations.
As of Sept. 30, 2022, Party City reported $1.67 billion in debt, with available liquidity of $122 million, made up of $30 million in cash and $92 million of revolver availability.
For the third quarter of Fiscal Year 2022, Party City recorded total net sales of $502.2 million, a 1.6% decrease from the third quarter of 2021. Meanwhile, its adjusted loss for the period came in at $1.39 per share — wider than Wall Street analysts’ estimates of $0.10 per share.
To manage the difficult period, Weston said at the time that the company would trim costs by $30 million, savings that it expects to come out of retail store efficiencies, like information technology contracts, marketing expenses, professional services and raw materials. Additionally, the company reduced its corporate workforce by 19% through a combination of position eliminations and leaving open positions unfilled, he said.
After hiring Peter Smith as Party City’s new chief operations officer in November to spearhead the plan – as well as optimize its supply chain – the retailer reportedly renewed talks a few weeks later with advisors to address liquidity issues and help with restructuring.
As of Jan. 16, 2023, Party City has retained David Orlofsky of consulting firm AlixPartners to serve as its chief restructuring officer, according to the company’s filing with the U.S. Securities and Exchange Commission.
In that role, Orlofsky will oversee all restructuring activities, cash management and liquidity forecasting as well as development and revisions to the company’s business plan and engagement with creditors and other stakeholders.
Party City Holdings Inc. cut the ribbon on its brand-new corporate headquarters in Woodcliff Lake on Oct. 6, 2022. – OFFICE OF WOODCLIFF MAYOR CARLOS RENDO
Founded 36 years ago in East Hanover, Party City is the largest retailer of party goods in the U.S., Canada and Mexico. It operates more than 900 company-owned and franchise outlets under the Party City, Halloween City, Toy City, Factory Card and Party Outlet brands. However, the company has struggled to keep pace with changing consumer behavior in recent years, particularly amid the growth of e-commerce and big box retailers.
Since 2019, the company has been working on large-scale changes, such as restructuring its debt and closing 55 stores.
Party City’s credit risk was downgraded in November 2022 by Fitch Ratings, which cited “rapid deterioration” in the company’s operations and liquidity along with a “likely untenable” capital structure. Due to a number of factors – such as supply chain challenges, rising input costs and “mis-execution” – Fitch said the company’s financial results have “steadily weakened” throughout the course of 2022 and would be at risk of default “unless operations meaningfully improve over the next 12-18 months.”
The bankruptcy petition comes a month after Party City was notified by the New York Stock Exchange (NYSE) that it is at risk of being delisted for failing to maintain an average $1 per share stock price over a 30-day trading period.
Last fall, it became the first company to win an award under the state’s Emerge Program, a $14.5 billion job creation package launched using funding from the New Jersey Economic Recovery Act of 2020.
“Party City has not yet received any of the tax credits for which it was approved,” a representative from the New Jersey Economic Development Authority (NJEDA) told NJBIZ. “As the Emerge program is performance-based, an approved company only begins receiving its annual disbursement of tax credits once it has certified that it has met the commitments it made for job creation and investment at the time of its approval.
Editor’s note: This story was updated at 7:19 a.m. ET Jan. 19 to include a statement from the New Jersey Economic Development Authority.
The start of the new year came with two major developments to a story that NJBIZ extensively chronicled in 2022: the ongoing bankruptcy case involving Celsius Network LLC.
On Jan. 4, Judge Martin Glenn, chief justice of the U.S. Bankruptcy Court for the Southern District of New York, issued a ruling that will have enormous ramifications for Celsius customers who were locked out of accounts, as well as potentially setting precedent for future crypto sector bankruptcy cases.
The Hoboken-based crypto lender filed Chapter 11 last summer amid a broader downward spiral in the sector and served as something of a bellwether for what would come, with the subsequent fall of FTX followed by the November bankruptcy of Jersey City-based BlockFi.
In a 45-page decision, Glenn ruled that funds deposited into high-interest bearing Earn Accounts belong to the company’s bankruptcy estate — not Celsius customers.
As of July 2022, there were some 600,000 Earn Accounts, holding around $4.2 billion in value, including $18 million in stablecoins, which Glenn wrote that he believed Celsius should be able to sell in order to fund administrative costs for the next few months.
The Jan. 4 ruling could dramatically shape future cases in how crypto interest-bearing accounts are viewed versus conventional wallets and accounts, as well as highlighting how central the Terms of Service of particular crypto platforms are to future bankruptcy proceedings.
State regulators and the U.S. Trustees have opposed such a sale.
“The Court concludes, based on Celsius’s unambiguous Terms of Use, and subject to any reserved defenses, that when the cryptocurrency assets (including stablecoins, discussed in detail below) were deposited in Earn Accounts, the cryptocurrency assets became Celsius’s property; and the cryptocurrency assets remaining in the Earn Accounts on the Petition Date became property of the Debtors’ bankruptcy estates (the “Estates”),” Glenn wrote.
In explaining the ruling, Glenn described the issue of ownership of these assets as a contract law issue, and regarded these account holders as unsecured creditors in this bankruptcy process — meaning they are owed money, but just how much they will recover remains to be seen.
“The Court finds that there was a valid contract between Celsius Account Holders and Celsius and that the contract terms unambiguously transferred all right and title of digital assets to Celsius,” the verdict stated.
The ruling could dramatically shape future cases in how these types of interest-bearing accounts are viewed versus conventional wallets and accounts, as well as highlighting how central the Terms of Service of particular crypto platforms are to future bankruptcy proceedings.
Wallets have typically been treated by crypto platforms as belonging to its customers.
‘A path of financial ruin’
Meanwhile, on Jan. 5, New York Attorney General Leticia James announced a civil lawsuit against Alex Mashinsky, the embattled former CEO and co-founder of Celsius.
The lawsuit alleges that Mashinsky defrauded hundreds of thousands of investors – including more than 26,000 New Yorkers – out of billions of dollars worth of cryptocurrency, accusing him of repeatedly making false and misleading statements about the safety of Celsius to entice investors to deposit billions of dollars in assets onto the platform.
“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” said James. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal. Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses.”
James said she is seeking to:
permanently bar Mashinsky from engaging in any business relating to the issuance, offer, or sale of securities or commodities in New York
stop him from serving as a director or officer of any company doing business in New York
secure disgorgement of any proceeds derived from Mashinsky’s “unlawful conduct,” as well as damages and restitution for investors
Mashinsky has not put out any statement or public comment in response to the lawsuit.
The former CEO was very much the public face of Celsius until he stepped down in late September. In his resignation letter, he reiterated his support to “provide the best outcome for all creditors.”
“I regret that my continued role as CEO has become an increasing distraction, and I am very sorry about the difficult financial circumstances members of our community are facing,” Mashinsky wrote at the time. “Since the pause, I have worked tirelessly to help the company and its advisors put forward a viable plan for the company to return coins to creditors in the fairest and most efficient way. I am committed to helping the company continue to flesh out and promote that plan, in order to help account holders become whole.”
A motion hearing will be held Jan. 10 to determine when Celsius creditors can submit their claims by.
Celsius was given an extension until Feb. 15 to submit a detailed Chapter 11 reorganization plan on how it will maximize the recovery and value for creditors and shareholders.
Bed Bath & Beyond said is exploring financial options, like restructuring or refinancing its debt, selling assets or seeking additional capital, as well as a potential bankruptcy, but warned, “These measures may not be successful.” – DAWN FURNAS
Bed Bath & Beyond Inc., the Union-based home goods giant, said it is running out of money and may consider filing for bankruptcy protection.
After struggling in recent years to turn itself around amid declining sales, fewer shoppers and inventory outages, the retailer said in a Jan. 5 update it “has concluded that there is substantial doubt about the company’s ability to continue as a going concern” and said it likely will not have the cash needed to cover expenses, such as lease agreements and payments to suppliers.
As a result, Bed Bath & Beyond said is exploring financial options, like restructuring or refinancing its debt, selling assets or seeking additional capital, as well as a potential bankruptcy, but warned, “These measures may not be successful.”
A combination of reduced levels of available inventory and lower customer traffic drove sales down to $1.259 billion for the third quarter of Fiscal Year 2022 — a 33% decrease from the same period last year. Bed Bath & Beyond also expects to report a net loss of around $385.8 million for the period, including impairment charges of $100 million, compared with a net loss of $276.4 million for the same timeframe a year ago.
Bed Bath & Beyond’s full results for Q3 – which ended Nov. 26, just as the key holiday shopping season ramped up – will be reported Jan. 10.
She also reaffirmed the company’s commitment to rebuilding itself and making sure its brands (Bed Bath & Beyond, Harmon and Buybuy Baby) remain “destinations of choice for customers well into the future.”
The first part of the plan, she said, “enables us to refocus merchandising and inventory, operate more efficiently, and grow our digital and omni-capabilities, and the second focuses on strengthening our financial position. Transforming an organization of our size and scale requires time, and we anticipate that each coming quarter will build on our progress.”
She continued, “Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints as we partnered with our suppliers to navigate both micro- and macro- economic challenges. Reduced credit limits resulted in lower levels of in-stock presentation within the assortments that our customers expect. Consequently, we have already leveraged the liquidity gained from the holiday season to immediately pursue higher in-stock levels with support from our key vendors.”
According to Gove, when in-stock levels have increased, the company has seen trends improve.
“Strengthening our ability to serve our customers will continue to drive our decision-making. We are resetting foundational elements to create a stronger and more nimble infrastructure that aligns closely with customer demand and preference. We continue to manage our financial position amidst a changing landscape and work with expert advisors as we consider all paths and strategic alternatives to accomplish our short- and long-term goals. We look forward to providing an update on these fronts on our formal third quarter earnings call next week,” she said.
Under the strategic plan announced in August, Bed Bath & Beyond aims to strengthen its financial positioning, increase customer engagement, drive traffic and recapture market share. As part of the first phase, the company closed 150 banner stores – including three in New Jersey – and let go of about 20% of its Bed Bath & Beyond workforce.
Despite calls from activist investor Ryan Cohen for Bed Bath & Beyond to narrow the focus of its turnaround and consider selling Buybuy Baby, the company has said it sees “strategic potential” in the brand and will continue to monitor its progress.
As beleaguered Jersey City cryptocurrency lender BlockFi continues its Chapter 11 proceedings, Genova Burns LLC announced Jan. 3 it will serve as local counsel in the bankruptcy case.
That action came less than a month after the platform halted withdrawals.
Two weeks ago, BlockFi filed a motion in U.S. Bankruptcy Court for the District of New Jersey to allow customer withdrawals, which are still currently frozen on the platform. A hearing on that motion is set for Jan. 9.
For the BlockFi bankruptcy, Newark-based Genova Burns will work with the national bankruptcy and cryptocurrency groups at Brown Rudnick LLP, primary counsel to the creditor’s committee.
Stolz
Daniel Stolz, chair of Genova Burns’ Bankruptcy, Reorganization & Creditors’ Rights practice, said the firm is honored to be retained in this landmark Chapter 11 case.
“Our team is looking forward to working diligently to provide creditors of BlockFi with the largest possible recovery,” said Stolz.
“This is another step towards firmly establishing Genova Burns as a key player in the bankruptcy and restructuring space, and as an emerging player in the world of cryptocurrency disputes,” added James Burns, managing partner of Genova Burns, in a statement.
Pashman Stein Walder Hayden launched a bankruptcy, restructuring and creditors’ rights practice on Feb. 23 with the addition of partner John Weiss, who chairs the new group.
Establishing a bankruptcy and reorganization practice has been part of of the firm’s strategic growth plan, according to firm Chair and Managing Partner Michael Stein.
“Having an AM Law 100 lawyer of John’s caliber leading the practice will enhance the quality of service we provide to our clients and add further depth to the firm,” Stein said.
Weiss has more than two decades of experience providing counsel in complex Chapter 11 bankruptcy proceedings and helping navigate restructuring and bankruptcy transactions and litigation. He has extensive national experience representing defendants in avoidance actions, and advising professional service firms on bankruptcy retention and fee-related issues.
Weiss said he was excited to “build a sophisticated bankruptcy and restructuring practice that provides the high-quality service our clients expect, but in a more cost-effective manner.”
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