May 8, 2021

DCTRS

Damascus Center for Theoretical and Civil Rights Studies

Alamo Drafthouse files for 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.

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 will permanently cease.

League, who launched Alamo Drafthouse with a single-screen Austin repertory theater with his wife 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 Delaware bankruptcy filing comes as multiplexes across the country continue to struggle due to widespread 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.

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 including Cinemark, AMC and Imax Corp. have climbed in recent months amid renewed optimism about a potential recovery.

Privately held Alamo Drafthouse has 41 locations, including a downtown Los Angeles theater that opened in 2019 but has been closed throughout the coronavirus crisis. 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 said.

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.

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.