Redbox Owner to Shut Down Kiosk Business in Bankruptcy

Redbox Owner to Shut Down Kiosk Business in Bankruptcy

The owner of Redbox will shut down its business in bankruptcy, lay off more than 1,000 employees and appoint a trustee to investigate allegations of self-dealing and mismanagement by its controlling shareholder.

A lawyer for Redbox parent company Chicken Soup for the Soul Entertainment said in a court hearing Wednesday it will convert its chapter 11 case to a liquidation proceeding under chapter 7 because its lenders aren’t willing to take the risk of financing the business any more.

The company will lay off its workers and shut down and liquidate its business lines, which include streaming services as well as a network of 24,000 DVD rental kiosks stationed at retailers, according to its lawyer, Richard Pachulski.

In court filings, top lender HPS Investment Partners alleged gross mismanagement at the company, which missed payroll last month before bankruptcy, causing its employees to lose medical benefits.

Judge Thomas Horan, who is overseeing the bankruptcy case, said he would grant the company’s request to convert to a chapter 7.

“There is no means to continue to pay employees, to pay any bills,” Horan said. “Based on allegations we’ve heard, it’s important that a chapter 7 trustee be appointed and undertake an appropriate investigation of the company,” including what assets can be garnered, as well as look into the potential misappropriation of funds held in trust for employees.

The judge said that “1,000 people are about to lose their jobs and they’re not even going to be paid for work that they did.”

Chicken Soup for the Soul Entertainment is a subsidiary of Chicken Soup for the Soul LLC, which publishes the namesake book series and isn’t part of the bankruptcy.

Chicken Soup for the Soul Entertainment took on about $360 million in debt when it acquired Redbox in 2022. It entered bankruptcy owing money to creditors including Walmart and Walgreens, where some of its kiosks have been located, and several media companies such as Warner Bros. Home Entertainment and Sony Pictures Television.

The company has been locked in a governance dispute with HPS. In mid-June, the company removed all members of its board except for Chairman William Rouhana, who controls nearly 80% of the shares. The board was reconstituted after the bankruptcy filing in the hopes that lenders would finance a sale process.

Rouhana in a court filing last week called HPS’s allegations “irresponsibly false and scandalous” and said the focus should be on getting employees paid and their health benefits reinstated.

Write to Becky Yerak at [email protected]

  • https://www.msn.com/en-us/money/companies/redbox-owner-to-shut-down-kiosk-business-in-bankruptcy/ar-BB1pLCyN?ocid=00000000

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