PRTY - Party City stock slips after Fitch calls out 'rapid deterioration' of liquidity profile

Party City Holdco ( NYSE: PRTY ) stock declined in premarket trading as Fitch Ratings downgraded the company’s Long-Term Issuer Default Rating to CCC from B-.

“The downgrade reflects the rapid deterioration in Party City's operating and liquidity profile and Fitch's belief that Party City's capital structure is likely untenable,” Fitch’s downgrade note said. “Under Fitch's rating case assumptions, Party City will generate significant negative free cash flow in 2022, and the company has limited liquidity headroom to navigate further operational missteps.”

The downgrade said that leverage is likely to remain elevated in coming months. As such, company management will remain hard-pressed to address its capital structure, raising the risk of default “unless operations meaningfully improve over the next 12-18 months.”

Shares of the New Jersey-based party goods provider fell about 3% in premarket trading.

Read more on the company’s latest earrings results .

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