PRTY Party City Holdco Inc

On June 5, 2023, the Audit Committee (the “Audit Committee”) of the Board of Directors of Party City Holdco Inc. (the “Company”) received a letter from Ernst & Young LLP (“EY”) stating that EY had resigned as the Company’s independent registered accounting firm for the year ended December 31, 2022.

The reports of EY on the Company’s consolidated financial statements for the years ended December 31, 2021 and 2020 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.

In its resignation letter, EY noted (i) that the Company and users of its financial statements should not rely on EY’s previously completed interim review for the quarter and nine months ended September 30, 2022, because EY concluded that the Company ought to have disclosed in the financial statements in the Company’s quarterly report on Form 10-Q for the period ended September 30, 2022 (the “Third Quarter Form 10-Q”) that there was substantial doubt regarding the Company’s ability to continue as a going concern within one year resulting in a material error in such financial statements and (ii) that EY took exception to the Company’s “apparent” refusal to consider whether the financial statements in the Third Quarter Form 10-Q were materially misstated and, if so, to make an appropriate disclosure under Item 4.02(a) of Form 8-K.

The Company strongly disagrees with EY’s assertions in its resignation letter to the extent that they inaccurately imply that the Company refused to make any required disclosures under the federal securities laws. Prior to EY’s abrupt resignation, the Company had been engaged in ongoing discussions with EY and outside counsel regarding the most appropriate governance measures to be taken and disclosures to be made following the identification of the material weakness described under Item 4.02 below, which was identified in connection with the Company’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2022 while EY was conducting its annual audit for the year then ended and in connection with an investigation under the supervision of the Company’s Audit Committee. Indeed, the Company had shared proposed disclosure in a draft Form 10-K filing with EY in early June 2023 stating that (i) the material weakness in internal control over financial reporting may have resulted in a material error in management’s assessment of the Company’s ability to remain a going concern as of the third quarter of 2022 and (ii) investors should not rely on the financial statements in the Third Quarter Form 10-Q. Moreover, at the time of EY’s resignation, the Audit Committee had not yet made a final determination as to the substance or form of the Company’s disclosure regarding the material weakness and the reliability of the interim financial statements contained in the Third Quarter Form 10-Q, and in particular had not made a final determination as to whether such disclosure was most appropriately included in the Company’s forthcoming Form 10-K and/or on Form 8-K or as to whether the Third Quarter Form 10-Q should be restated. The Company had explicitly sought further input from EY as to any comments on the proposed disclosure that EY might have. The disclosure that the Company has made under Item 4.02 below is consistent with the views expressed by EY to the Company.

The Company has authorized EY to respond fully to the inquiries of any successor accountant concerning the subject matter of any disagreements.

The Company provided EY with a copy of the disclosures in this Current Report on Form 8-K. The Company requested that EY furnish a letter addressed to the SEC stating whether or not it agrees with the statements made herein. A copy of EY’s letter to the SEC is filed as Exhibit 16.1 to this Form 8-K.