How Chicken Soup for the Soul entangled a titan of private credit
A bitter bankruptcy fight is playing out between HPS Investment Partners and the parent company of Redbox
Just before the US Fourth of July holiday, the parent company of American DVD kiosk chain Redbox had run out of cash — and its biggest lender out of patience.
Redbox’s owner, the publishing, programming and pet food group Chicken Soup for the Soul, had filed for Chapter 11 bankruptcy hoping a judge could oversee a balance sheet restructuring, allowing it to cut some of its nearly $1bn of debt in a bid to salvage its business.
nstead, a war of words between Chicken Soup and its lender, the private capital group HPS Investment Partners, erupted: a breach so severe that the Delaware bankruptcy judge has ordered the company to liquidate immediately.
The ugliness has shocked even distressed debt veterans. But the Chicken Soup fight may be a preview of the future of corporate restructurings, where a single private credit lender can more forcefully exert power over a borrower than has previously been possible with more widely held bank loans.
“It’s unavoidable that there’s going to be some number of these private credit deals that need to restructure,” said Andrew Milgram, chief investment officer of Marblegate Asset Management, a distressed debt investor that was not involved in the bankruptcy.
“No matter how good a document or how good a lender you are, companies make mistakes . . . but you live with the consequences.