Alamo Drafthouse Cinema, a 41-unit chain that operates movie theaters with luxury seating and food and beverages, declared bankruptcy Wednesday morning.
As a part of the proceedings, Alamo has agreed to sell itself to a group of senior lenders, including Altamont Capital Partners and Fortress Investment Group. Tim League, co-founder of the brand, is among the purchasing group. The deal provides Alamo with $20 million in debtor-in-possession financing to continue operations.
Alamo listed between $100 million and $500 million in assets and between $100 million and $500 million in liabilities.
CFO Matthew Vonderahe said in a court filing that Alamo commenced proceedings to preserve and maximize value in the face of “an impending liquidity shortfall and significant industry headwinds primarily caused by the adverse impacts of the COVID-19 pandemic on the movie theater and dining industries.”
Six of the company’s 18 theaters are operating at 50 percent and only generating 20 percent of historical box office sales. Eleven of 23 franchised stores are operating with COVID relief and significantly reduced royalty payment plans.
In the past year, Alamo has reduced operating expenses, decreased G&A expenses, and increased customer safety with social distancing and enhanced cleaning measures. Alamo plans to close corporate stores in Austin, New Braunfels, Texas, and Kansas City. It will also end development of a new store in Orlando.
Alamo was founded by Tim and Karrie League in 1997 after a parking garage was converted into a one-screen theater. Over the years, the venture has expanded to 21 markets and added a full cocktail menu, special events, and multi-course meals.
Vonderahe said that prior to COVID, the company flourished despite increased competition and industry-wide pressures, and entered 2020 with strong liquidity That success came to a screeching halt in March when the pandemic arrived and authorities mandated the closure of movie theaters. The company was forced to furlough 80 percent of staff, reduce pay at both the corporate and theater level, negotiate rent deferrals, eliminate discretionary expenses, pause new theater development projects, and cancel its annual film festival.
The CFO said “revenue growth became impossible” and that Alamo’s liquidity became “seriously compromised” by the summer. During this time, the chain’s merchandizing arm, Mondo, provided a “crucial revenue stream that helped the Company to weather the extended shutdown.” Alamo rented theaters to individuals and groups and launched a video on demand platform, but supply remained limited and customer demand dwindled.
In response to the challenges, Alamo hired a financial advisory and investment-banking firm to assist with cash management practices and evaluate cost structure. But by the end of 2020, it became clear to the chain that operational fixes weren’t enough and that it needed immediate relief from its “overwhelming debt burden.”
Alamo engaged with its lenders, but they weren’t receptive to infusing more capital into the company. After those discussions failed, Fortress and Altamont Capital Partners agreed to acquire the debt and provide the brand with additional liquidity.
“With the ongoing support of Altamont Capital and Fortress Investment Group, the company will continue its mission of providing the best moviegoing experience in the country, sharing the films and food the Alamo Drafthouse team loves with the widest possible audience,” Alamo said in a statement.
Alamo’s announcement follows Studio Movie Grill, another restaurant/movie theater chain that declared bankruptcy in October. At the time, the chain had just $100,000 in current cash assets.
