THL-Backed Party City Sets $291M Dividend

Target: Party City

Price: $291 million

Sponsors: Thomas H. Lee Partners, Advent International

Party City is paying out a $291 million dividend to shareholders, according to a report from Moody’s Investors Service. PC Nextco Holdings, Party City’s newly formed parent company, and PC Nextco Finance, are issuing $350 million in senior PIK toggle notes to fund the payout, according to a company statement.

Rockaway, New Jersey-based Party City sells party supplies such as balloons, plates and piñatas. The company produced more than $1.9 billion in revenue for the 12 months ended March 31, Moody’s said.

THL acquired a majority stake in Party City in July 2012. The firm invested $584 million equity, peHUB reported. THL currently owns 69.44 percent of Party City, while Advent International has about 24 percent, according to an SEC filing. THL will likely receive about $202 million from the dividend, while Advent could get about $70 million. With the $202 million distribution, THL stands to get back about 34 percent of its investment after less than year.

Moody’s said that the dividend, if it closes, will “significantly increase” Party City’s leverage. “Moody’s anticipates that pro forma lease adjusted debt to EBITDA will increase to around 8.0 times for the twelve month period ended March 31, 2013 before considering pro forma synergies from recent acquisitions and other cost savings initiatives,” the report says.

The dividend comes as THL has yet to begin raising its next fund. THL closed its sixth buyout fund in 2007 at $8.1 billion, plus another $2 billion for co-investment vehicles. THL has succeeded in securing an extension on the investment period for Fund VI and has until mid-2014 to invest the pool, according to sources. Thomas H. Lee Equity Partners VI LP is generating a 3.2 percent net IRR, according to Dec. 31 data from the California Public Employees’ Retirement System.

Executives at Party City did not return calls for comment. THL declined comment.

Luisa Beltran is a senior writer for peHUB.