A Divided but Strategic Path
Despite these challenges, Judge Perez sided with Party City, highlighting that creditors overwhelmingly supported the deal. The plan ensures first-lien creditors are paid in full, while second-lien creditors and administrative claimants will share what’s expected to be between $10.8 million and $19.3 million in remaining cash.
Administrative claimants, unless they opt out, will accept reduced recoveries estimated between 23% and 33%.
“This plan isn’t flawless — far from it,” said Abraham Bane of Davis Polk & Wardwell LLP, representing the second-lien noteholders. “But it minimizes costs, sets up a liquidating trust, and offers the cleanest path forward.”
Party City’s Tumultuous Decline
The New Jersey-based retailer filed for Chapter 11 protection in December, staggering under $399 million in debt. The company plans to close about 700 stores and liquidate after efforts to revive sales collapsed, even following a previous bankruptcy in 2023.
Attorneys from Porter Hedges LLP and Paul Weiss Rifkind Wharton & Garrison LLP represented Party City, while the U.S. Trustee’s Office and multiple creditor groups, including the official committee of unsecured creditors, weighed in on the case.
Judge Perez concluded: “The plan may not be perfect, but it is the best path under grim financial realities.”
