Chicken Soup for the Soul Entertainment, Inc. filed Chapter 11 on June 28, 2024 and converted to Chapter 7 liquidation on July 10, 2024, after just 12 days in chapter 11. The company operated a hybrid entertainment platform combining streaming services (Redbox AVOD/FAST, Crackle, and related ad-supported platforms with ~40 million monthly active users) with a legacy physical media rental network (24,000 Redbox kiosks). The rapid conversion was driven by acute liquidity constraints attributed to prepetition secured lender HPS Investment Partners' refusal to approve working-capital financing, combined with governance disputes between HPS and controlling shareholder William Rouhana Jr., and significant employee wage and payroll tax arrears exceeding $15 million. The interim DIP structure approved on July 4, 2024 (an $8 million revolving facility from HPS) included governance conditions requiring Rouhana ally Bart Schwartz's removal as CEO and reinstatement of a Strategic Review Committee. The conversion triggered immediate wind-down: the company ceased streaming operations, shut down 24,000 Redbox kiosks, and laid off more than 1,000 employees. HPS Investment Partners held a dominant secured position ($500.9 million in principal asserted) as administrative and collateral agent for term and revolving facilities. The Chapter 7 trustee faces investigation into alleged misappropriation of withheld employee funds and payroll taxes, while former employees have filed claims alleging Ponzi scheme conduct. Remaining assets (streaming platforms, production subsidiaries, and kiosk network liquidation value) will be insufficient to satisfy secured debt, leaving general unsecured creditors and equity holders with minimal to zero recovery.
