Alamo Drafthouse Cinema did its best to overcome the COVID-19 pandemic. It reflects the majority of staff, cuts salaries for others, rents out theaters for private events, pauses expensive development projects, relies on its commercial business to save revenue, and launches a film service on demand.
In the end, it wasn’t enough. The company – the largest private theater chain in the United States – filed for bankruptcy protection on Wednesday morning.
Alamo Drafthouse joins Studio Movie Grill and Cinemex, two other significant theater chains, which also find that they cannot survive the prolonged suspension and absence of new versions without bankruptcy protection.
According to a court declaration filed in Delaware, Alamo Drafthouse is no longer able to service about $ 1
“At the end of 2020, it became clear to debtors that they needed immediate relief from their huge debt burden, as operational adjustments were not enough to overcome the impact of COVID-19 and industrial crosswinds,” Vonderae said. .
Alamo Drafthouse borrowed $ 105 million from Bank of America and several other banks in June 2018. The company is the leader in the dinner trend and has a pretty good year in 2019, outpacing the exhibition industry by 5%. According to Vonderahe, he entered 2020 with a strong liquidity position.
But the pandemic took its toll. Even as government restrictions have been largely lifted in the country, only six of the company’s 18 locations are open, and business there is only about 20% of capacity.
Alamo Drafthouse tried to renegotiate its debt with Bank of America and other banks, but found that they could not reach a deal that would provide the capital needed to continue operations. Instead, Altamont Capital, which owns 40 percent of the company’s equity, hired Fortress Investment Group to help buy the debt from the banks.
Tim League, founder of Alamo Drafthouse, and Dave Kennedy, a longtime co-owner and board member, continue to participate as minority partners of Altamont and Fortress.
League founded the theater chain in 1997 in Austin, Texas, turning it into a franchise with about 40 seats. The company has attracted dedicated followers with its food and beverage service (which includes movie cocktails), the special events it organizes, linked to cult or blockbusters, and the strict “don’t talk” rule.
Theaters in the country were closed for months in 2020, and the planned opening last summer failed to bring customers back to power before another outbreak of the virus in the fall and winter.
In August, Alamo eavesdropped on Hooligan Loki to investigate a possible sale of the company and test interest in the market.
The deal with Fortress in early January gave the company another $ 4 million track and allowed it to continue seeking flexibility from some landlords and retailers.
In February, Fortress and Altamont agreed to provide another $ 2 million, bringing the total debt to $ 112.7 million. (The company also received a $ 10 million loan from the PPP program.)
However, creditors have also made it clear that they cannot provide additional capital unless it benefits from bankruptcy. Under the bankruptcy plan, Fortress and Altamont have agreed to provide up to an additional $ 20 million in financing to the debtor at a steep 15% annual interest rate.
If all goes according to plan, Fortress and Altamont will convert their debt into equity in the reorganized company, although the process is open to competitive bidding. The theater chain will continue to operate. The company currently employs 107 full-time and 205 part-time employees.
With the spread of vaccines and cinemas reopening in New York, the sector hopes it can begin to recover in the coming months.
“We are extremely confident that by the end of 2021, the film industry – and in particular our theaters – will be thriving,” the League said in a statement.