Alamo Drafthouse theater chain files for Chapter 11 bankruptcy amid pandemic woes
Alamo Drafthouse Cinema, the quirky theater chain known for its craft beer and strict no-texting policy, has filed for Chapter 11 bankruptcy protection because of the COVID-19 pandemic.
The Austin, Texas-based company said Wednesday that it will sell its assets to a group of senior creditors, including private equity firms Altamont Capital Partners and Fortress Investment Group. The investor group buying the assets also includes Alamo Drafthouse founder Tim League.
This does not mean Alamo Drafthouse is going out of business. In a statement, the company said the deal will provide it with capital to stabilize itself, including $20 million in debtor-in-possession financing. “More importantly, it will position Alamo Drafthouse to return to growth and continue executing on its long-term strategic vision,” the chain said.
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However, three theaters will permanently close: Alamo Drafthouse Ritz in Austin, and locations in Kansas City, Mo., and New Braunfels, Texas. Additionally, development of a location in Orlando, Fla., will permanently cease.
Plans are still in place to reopen the downtown Los Angeles location, which opened in 2019 at the Bloc shopping center, when permitted, an Alamo Drafthouse spokesman said.
League, who launched Alamo Drafthouse with a single-screen Austin repertory theater with his wife Karrie in 1997, struck an upbeat tone in a statement about the company’s future, citing the nationwide vaccination effort and pent-up demand for moviegoing, but acknowledged the challenges.
“We’re extremely confident that by the end of 2021, the cinema industry — and our theaters specifically — will be thriving,” said League, who is executive chairman. “That said, these are difficult times and during this bankruptcy we will have to make difficult decisions about our lease portfolio.”
The Austin, Texas-based chain opens its first venue in Los Angeles and looks to find its own place in the local community of movie fans.
The Delaware bankruptcy filing comes as multiplexes across the country continue to struggle because ofwidespread theater closures, the lack of new blockbusters from Hollywood and the reluctance of many moviegoers to return to cinemas. Only about 42% of theaters in North America are open, according to Comscore.
AMC Entertainment, owner of the world’s largest movie-theater footprint, has staved off bankruptcy multiple times during the pandemic by raising money from Wall Street. Dallas-based dine-in circuit Studio Movie Grill filed for Chapter 11 protection from creditors in October.
Retail investors inspired by Reddit took AMC’s stock on a wild ride early this year, after sending shares of GameStop soaring. Theater-chain stocks such as Cinemark, AMC and Imax Corp. have climbed in recent months amid renewed optimism about a potential recovery.
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Privately held Alamo Drafthouse has 41 locations, 18 of which are company-owned and 23 of which are franchised. The chain boasts a loyal fanbase and caters to it with themed screenings, including its Terror Tuesday program.
The outspoken company often weighs in on industry-related controversies. On Tuesday, Alamo Drafthouse said its theaters will continue to require masks and social-distancing measures for its patrons, despite Texas Gov. Greg Abbott’s move to end the state’s mask mandate.
“We are only following the guidance of the CDC and medical experts, not politicians,” the firm stated.
In a declaration, Alamo Drafthouse Chief Financial Officer Matthew Vonderahe said that before the pandemic, the company was in good shape despite challenges facing the theatrical film industry.
The domestic box office fell 5% in 2019 because of factors including the rising popularity of streaming movies. Still, “Alamo’s business experienced its strongest performance yet and outperformed the industry by over 5% primarily due to its ability to program non-’tent-pole’ movies,” Vonderahe said.
But pandemic health protocols have weighed on its business. Six of its 18 company-owned locations are operating with 50% capacity limits and “less than 20% box office sales at these locations,” Vonderahe said.
In April 2020, the company received a $10-million loan under the Paycheck Protection Program as part of the U.S. government’s coronavirus economic relief plan. The company has filed for partial forgiveness of the debt, which is intended to protect jobs.
Alamo Drafthouse’s bankruptcy filing lists between $100 million and $500 million in assets and between $100 million and $500 million in liabilities. It has at least 200 creditors.
League stepped aside as chief executive in April, making way for Shelli Taylor, formerly president of United Planet Fitness Partners, to become its new chief.
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