Employees at Chicken Soup for the Soul Entertainment, the parent company of Redbox, are on track to resume their regular pay and benefits under a loan agreement that received initial approval from a bankruptcy court judge.
The company’s roughly 1,000 employees haven’t been paid in at least two weeks, and in some cases longer. Chicken Soup filed for bankruptcy protection last weekend after months of financial difficulties.
Delaware Bankruptcy Court Judge Thomas M. Horan on Thursday issued an order authorizing an $8 million “debtor in possession” loan following a preliminary hearing Wednesday. The order is subject to a final hearing in the coming days. Of the total loan amount, up to $3.5 million will be used for past-due wages and wages owed today (July 5), up to $2.85 million will be set aside for payroll deductions and an additional $1.65 million will be used to pay Anthem for health insurance premiums.
As Deadline first reported, employee medical benefits had been suspended since mid-May.
In his order, Horan wrote that approval of the DIP loan is “necessary to prevent immediate and irreparable harm to the debtors and their assets pending the final hearing.” The measure is also “essential to the debtors’ continued operations and preservation of the value of their assets,” he added.
CSSE, which went public in 2017 as a media-focused spinoff of its namesake self-help book publisher, acquired streaming service Crackle and film distributors Screen Media and 1091 Pictures en route to its ill-fated acquisition of video kiosk operator Redbox. The company disclosed $970 million in debt in its bankruptcy filing, with unsecured creditors including Universal Studios, Sony Pictures, Lionsgate, Walmart, Vizio, Warner Bros. and Paramount Pictures.
As the DIP loan process played out in Delaware court, another aspect of the Chapter 11 case also emerged. HPS Investment Partners, which was one of the company’s backers and arranged the financing for the DIP loan, objected to the leadership change announced earlier in the week. Bart Schwartz, a former federal prosecutor who runs a New York-based consulting firm, was introduced as the company’s new CEO, and he and two others were installed on the company’s board of directors.
RELATED: Chicken Soup For The Soul Entertainment Installs New CEO and Board of Directors
The leadership change was led by Bill Rouhana, the company’s former longtime CEO and chairman, who last month fired the entire board in a dramatic move. HPS said creditors were not notified in advance of the planned leadership changes. Given the unpaid salaries and benefits suspended under Rouhana’s leadership, HPS argued that the court should allow directors who were fired by the director to return to the board.
In response, Rouhana’s attorneys said in a filing that HPS “tainted the first motion proceedings with false, outrageous, and irresponsible allegations about Mr. Rouhana’s former leadership.” The former CEO “believes that the court and the parties should focus at this time on ensuring that employees who have already rendered services to the debtors receive their salaries immediately and that their health insurance is reinstated.”
CSSE shares, meanwhile, are trading at 10.55 cents a share, having fallen by nearly half since the bankruptcy filing, but have not traded since Tuesday. Nasdaq had issued several warnings about a possible delisting because the stock had not traded above $1 for an extended period.
News Source : deadline.com
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