Alamo Drafthouse Cinema has done whatever it takes to tackle the COVID-19 epidemic, it has led most of its employees to cut costs for those who remain, rent theaters for private events, temporarily stop expensive development projects, and rely on businesses. Selling merchandise to maintain revenue and launching a movie on demand service.
Ultimately, it wasn’t enough.The company, the largest private theater network in the United States, filed for bankruptcy on Wednesday morning.
Alamo Drafthouse joined Studio Movie Grill and Cinemex, two other large theater chains that found they could not survive a long shutdown and the absence of a new model without bankruptcy protection.
According to a court notice in Delaware, Alamo Drafthouse is no longer able to pay off about $ 105 million in long-term debt.
“By the end of 2020, debtors were clear they needed immediate relief from overwhelming debt burdens because operational solutions were not enough to overcome the effects of COVID-19 and the industry’s disasters,” Vonderahe said.
Alamo Drafthouse borrowed $ 105 million from Bank of America and several other banks in June 2018.The company was a leader in the theater dining trend and had a pretty good year in 2019, surpassing the exhibition industry by five. % According to Vonderahe, entering 2020 in a strong liquidity position.
But the outbreak was affected. Even now, with government restrictions, most of which have been eliminated nationwide, only 6 of the 18 company-owned sites are open and businesses account for 20% of the capacity.
Alamo Drafthouse tried to negotiate new debt with Bank of America and other banks, but found that they were unable to reach an agreement to provide the capital it needs to continue its operations, so Altamont Capital, which is 40% of the company’s stake, has. Enter Fortress Investment Group to help buy bank debt.
Alamo Drafthouse founder Tim League and longtime co-owner Dave Kennedy and board members remain engaged as minority partners with Altamont and Fortress.
The League founded the Theater Group in 1997 in Austin, Texas, and has grown into a franchise with approximately 40 branches.The company draws on this specifically with food and beverage service. (This includes movie-themed cocktails), special events linked to cult or blockbuster films, and strictly enforced “do not speak” rules.
Theaters across the country closed for months in 2020 and the planned reopening last summer failed to bring customers back to use before another virus outbreak in the fall. And winter
In August, Alamo tapped Houlihan Lokey to explore the company’s possible sales and test its interest in the market.
The deal with Fortress was completed in early January, giving the company an additional $ 4 million in runways and allowing the company to continue to seek flexibility from some homeowners and merchants.
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, the lenders made it clear that they were unable to provide additional funding unless it came with bankruptcy benefits. Under the bankruptcy plan, Fortress and Altamont have agreed to provide additional $ 20 million to their debtors with interest rates of up to 15% annually.
If all goes according to plan, Fortress and Altamont will convert debt to equity in the reorganized company, even if the process is open to competitor bidding. The theater chain will continue to operate, and the company currently has 107 full-time employees and 205 part-time employees.
By distributing vaccines and green-lit cinemas to reopen in New York City, the sector hopes to begin to recover in the coming months.
“We are very confident that by the end of 2021, our cinema and cinema industry in particular will flourish,” the league said in a statement.