Redbox Parent Chicken Soup for the Soul Entertainment Shifts Bankruptcy Filing to Chapter 7, Will Liquidate Business
Chicken Soup for the Soul Entertainment, the parent company of Redbox, has made the difficult decision to shift its bankruptcy filing from Chapter 11 to Chapter 7, signaling the liquidation of its business. The company, burdened by nearly $1 billion in debt and a mountain of unpaid bills, initially filed for bankruptcy protection on June 29.
During bankruptcy court proceedings, Chicken Soup for the Soul Entertainment secured a $8 million “debtor in possession” loan to help resume paying workers who had gone nearly a month without paychecks and restore their medical benefits. However, on Wednesday, HPS Investment Partners, one of the company’s backers, stated that it could not provide any additional financial resources.
As a result, the company made a motion to shift the bankruptcy case to Chapter 7, which was approved by U.S. Bankruptcy Judge Thomas M. Horan. This decision means that all 24,000 Redbox kiosks will shut down and employees will be let go. The details regarding back pay and severance for employees have not been finalized, but a town hall meeting has been scheduled for Thursday.
Former CEO Bill Rouhana has obtained legal counsel as the court navigates through various claims about the company’s financial operations. The situation has been described as “heartbreaking” by Chicken Soup for the Soul Entertainment’s lawyer, Richard Pachulski, who stated that efforts were made to find a solution, but ultimately the decision to liquidate was reached.
Employees who had paid health care premiums were denied coverage since mid-May due to the company’s failure to pay Anthem, its provider. The former board members of the company emphasized that employees should not provide any services without assurance of payment.
Chicken Soup for the Soul Entertainment, which separated from the self-help book publisher in 2017, grew through acquisitions such as Crackle, Screen Media, and 1091 Pictures. The $375 million acquisition of Redbox in 2022 proved to be a downfall for the company.
“It’s not right what they’re doing to the employees,” one worker expressed to Deadline. The situation continues to unfold as the bankruptcy case progresses.
