A Massive Retailer with 29K Locations Now Files Bankruptcy

June 30, 2024

A massive retailer with 29k locations now files bankruptcy after claiming both $500 million to $1 billion in debt and assets.

The parent company of Redbox, which rents DVDs through kiosks and has more than 29,000 locations, has now filed for bankruptcy.

Chicken Soup for the Soul Entertainment, which is not the same company that publishes self-help books under that brand, owns Redbox, the DVD kiosks you see in front of pharmacies and grocery stores.

The company bought Redbox in 2022 for $357 million in stock and debt.

It’s a situation that has led to significant debt, problems paying employees, and a Chapter 11 bankruptcy filing, reports TheStreet.

Chicken Soup for the Soul Entertainment has filed for Chapter 11 bankruptcy in Delaware claiming both $500 million to $1 billion in debt and assets.

The filing came after missing a week of paying its employees and failing to secure financing.

“Overnight we filed for Chapter 11 bankruptcy protection.

In connection with the filing, we have applied for approval of a debtor in possession [DIP] loan.

Upon court approval, we expect payroll to be funded early in the week and funding for this upcoming week’s payroll to also be secured.

We also expect to have the funds to reinstate medical benefits back to May 14, 2024 and going forward.

We will provide regular updates,” the company shared in an email to employees.

The company has arranged for a DIP loan for up to $100 million to fund operations during the bankruptcy period.

In addition to the financial burden of the transaction, the Hollywood studio pipeline was constricted by the dual strikes in 2023, only exacerbating the decline of physical disc rentals.

A number of vendors and filmmakers had also gone unpaid, and some had filed lawsuits, according to the outlet.

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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy

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An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.

Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.

Supply Source brands include The Safety Zone and Impact Products.

The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.

Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.

Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products

The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.

However, the company’s financial performance deteriorated in subsequent years.

Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.

The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.

In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.

Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.

The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.

The excess inventory forced the debtor to secure additional storage space, which increased storage costs.

These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.

The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.

The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.

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Also Read: This Massive Mall Retailer Is Now Closing In California

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