Balloon manufacturer Anagram has filed for bankruptcy due to growing uncertainty surrounding its supply agreement with Party City, its corporate parent.
Party City plays a massive role in Anagram’s business, making up a whopping 38% of its sales.
However, Anagram also supplies products to other outlets, such as distributors, dollar stores, and retail giants like Walmart.
Adding to the complexity, Party City and Anagram also share intellectual property licenses, which were a considerable source of income in 2022, with Anagram making $25 million in sales based on licenses owned by Party City.
Earlier this year, Party City filed for Chapter 11 bankruptcy, though it didn’t include Anagram in the filing.
While Party City’s bankruptcy plan has received approval from a federal judge, it is still an ongoing case.
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In May, Party City initiated a move to terminate its supply contract with Anagram as part of its Chapter 11 proceedings.
This move has put additional strain on Anagram’s operations and its own restructuring efforts, according to Anagram’s Chief Restructuring Officer, Adrian Frankum.
Originally, Party City would have had to pay a substantial $40 million in termination fees if it decided to end the supply agreement, which was established back in 2020.
However, Frankum suggests that Anagram may receive only minimal repayment of these fees in the ongoing bankruptcy process.
Anagram’s history dates back to 1978 when it was founded by Garry Kieves.
It later became a subsidiary of Party City through a series of acquisitions starting in the 1990s.
Today, a significant portion of Anagram’s product lineup consists of helium balloons, a segment that has faced financial challenges due to recent helium shortages.
The company operates a 110,000-square-foot manufacturing and printing facility at its headquarters in Eden Prairie, Minnesota, along with a 391,000-square-foot distribution facility in Bloomington, Minnesota.
In total, Anagram employs about 350 people across all of its facilities.
Despite the challenges faced by its parent company, Party City, Anagram had been performing well in recent years.
In 2021, the company experienced substantial revenue growth, with its operating profit more than tripling.
Analysts had previously speculated that Party City’s decision to exclude its Anagram subsidiaries from its bankruptcy filing indicated a potential spin off of Anagram’s business.
The recent Chapter 11 filing seems to confirm these expectations, as it could lead to Anagram’s ownership transferring to bondholders and a subsequent separation from Party City.
