Redbox’s parent, Chicken Soup for the Soul Entertainment, has filed for bankruptcy, burdened by nearly $1 billion in debt.
The filing occurred in the US Bankruptcy Court in Wilmington, Delaware, due to a group of lenders led by HPS Investment Partners refusing to agree to potential refinancing.
Chicken Soup for the Soul Entertainment, operates streaming services and a network of 24,000 DVD rental kiosks.
It owes substantial amounts to creditors, including Walmart, Walgreens, Warner Bros. Home Entertainment, and Sony Pictures Television.Â
The company incurred roughly $360 million in debt following its acquisition of Redbox in 2022.
The company’s stock has plummeted by 90 percent over the past year.
It closed at about 12 cents per share on Monday, July 1.Â
The anticipated rebound in kiosk demand post-COVID-19 pandemic did not materialize.
This was primarily due to the company’s inability to secure sufficient funds to purchase new releases.
Chairman William Rouhana disclosed in a sworn declaration the company began exploring asset sales, new financing options, and debt restructuring last fall.Â
However, these efforts failed because existing lenders were unwilling to cooperate.
HPS Investment Partners accused the company of “gross mismanagement.”
It has requested the appointment of a Chapter 11 trustee to oversee the business.Â
Typically, US bankruptcy law allows a reorganizing company to manage its own assets, but a trustee can be appointed in cases of significant disarray.
HPS suggested reconstituting the board with independent directors as an alternative.
In June, the company removed all board members except Rouhana, who controls nearly 80 percent of the shares.
HPS claimed the company failed to pay over 1,000 employees, leading to the termination of their medical benefits.
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The company also owes $15 million in payroll taxes.
HPS also accused the company of dishonest practices.
Chicken Soup for the Soul Entertainment has debts of nearly $1 billion
It alleges behavior including attempting to make an interest payment by dropping a check at an abandoned building.
A Chicken Soup spokesman declined to comment on the HPS requests.
They did acknowledge the inability to meet payroll for the two weeks ending June 14.Â
Judge Thomas Horan expressed concern over the unpaid employees and indicated that the hearing would reconvene on Tuesday.
As of March, the business reported $414 million in assets and $970 million in debts.
Chicken Soup for the Soul Entertainment is a subsidiary of Chicken Soup for the Soul LLC, which publishes the namesake book series and is not part of the bankruptcy proceedings.
