Alamo Drafthouse could not survive the pandemic



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Alamo Drafthouse Cinema has done everything to overcome the COVID-19 pandemic. It laid off most of the staff, cut the wages of those who stayed, rented venues for private events, suspended expensive development projects, relied on its merchandising business to continue generating income, and launched on-demand movie service.

In the end, it was not enough. The company – the largest private theater chain in the United States – filed for bankruptcy on Wednesday morning.

Alamo Drafthouse joins Studio Movie Grill and Cinemex, two other major movie chains that also found they couldn’t survive the extended shutdown and lack of new releases without bankruptcy protection.

According to a court declaration filed in Delaware, Alamo Drafthouse was no longer able to repay around $ 105 million in long-term debt.

“By the end of 2020, it became clear to debtors that they needed immediate relief from their heavy debt burden, as operational solutions were not sufficient to overcome the impact of COVID-19 and headwinds in the industry, ”wrote Matthew Vonderahe, chief executive of the company. financial director.

Alamo Drafthouse had borrowed the $ 105 million from Bank of America and several other banks in June 2018. The company is a leader in the dine-in-theaters trend and had a fairly good year in 2019, topping 5% the exhibition industry. According to Vonderahe, in 2020 it entered a strong liquidity position.

But the pandemic has taken its toll. Even now, with government restrictions lifted across the country, only six of the company’s 18-owned sites are open, and companies only account for about 20% of capacity.

Alamo Drafthouse sought to renegotiate its debt with Bank of America and the other banks, but found that they could not come to a deal that would provide the capital needed to keep operating. Instead, Altamont Capital – which owns 40% of the company’s capital – turned to Fortress Investment Group to help it buy the debt from the banks.

Tim League, founder of Alamo Drafthouse, and Dave Kennedy, longtime co-owner and board member, remain involved as minority partners with Altamont and Fortress.

League founded the theater chain in 1997 in Austin, Texas, turning it into a franchise that has around 40 locations. The company has attracted a dedicated audience with its catering service (which includes movie-themed cocktails), the special events it hosts related to cult or blockbuster movies, and its strictly enforced rule of no-talk. .

Theaters across the country were closed for months in 2020, and a reopening slated for last summer failed to bring customers back in full force before another outbreak of the virus occurred in the fall and into winter.

In August, Alamo brought in Houlihan Lokey to explore a possible sale of the company and test market interest.

The deal with Fortress, reached in early January, gave the company an additional $ 4 million of lead and allowed it to continue to seek flexibility from certain owners and sellers.

In February, Fortress and Altamont agreed to provide an additional $ 2 million, bringing the total debt to $ 112.7 million. (The company also secured a $ 10 million loan from the PPP program.)

However, lenders have also made it clear that they cannot provide additional capital unless it comes with the benefits of bankruptcy. As part of the bankruptcy plan, Fortress and Altamont have agreed to provide up to $ 20 million in additional financing to debtors in possession, with a high annual interest rate of 15%.

If all goes according to plan, Fortress and Altamont will convert their debt to equity in the reorganized company, although the process is open to competing offers. The theater chain will continue to operate. The company currently employs 107 full-time and 205 part-time workers.

With the distribution of vaccines and the reopening of cinemas in New York, the sector hopes to be able to rebound in the coming months.

“We are extremely confident that by the end of 2021, the film industry – and our theaters in particular – will thrive,” League said in a statement.



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