Texas-based chain Alamo Drafthouse announced this morning that they are filing for Chapter 11 bankruptcy—making them the third top-50 North American chain, following CMX Cinemas in April and Studio Movie Grill in October, to do so as a result of the Covid-19 pandemic.
The dine-in based theater chain, per a statement, has voluntarily filed for Chapter 11 bankruptcy and “entered into an asset purchase agreement for the sale of substantially all its assets to its senior lender group, including Altamont Capital Partners, funds managed by affiliates of Fortress Investment Group LLC (‘Fortress’), founder Tim League, and other original investors.” That transaction, they continue, will provide the chain with the financing it needs to maintain operation during the pandemic and continue its long-term growth strategy after the pandemic is over. The company has three franchise-owned locations slated to open later this year.
The bulk of Alamo’s currently-open locations—whether owned by the company or operated by franchisees, a model unique to Alamo among North American theater chains—will remain in operation where allowed to be so by local Covid-19 restrictions.
That said, the Chapter 11 process “will allow Alamo Drafthouse to shed nonviable locations and restructure its lease obligations along with other contracts.” Three company-owned locations—the Alamo Drafthouse Ritz in Austin and cinemas in Kansas City, MO and New Braunfels, TX—will close permanently, while the development of their planned Orlando, FL theater has been ceased. Moving forward, Alamo “will continue to evaluate the health of all leases during the chapter 11 process and make determinations about additional lease terminations in deciding which locations will be part of the go-forward business.”
“Alamo Drafthouse had one of its most successful years in the company’s history in 2019 with the launch of its first Los Angeles theater and box office revenue that outperformed the rest of the industry,” says Alamo Drafthouse CEO Shelli Taylor, who joined the company in Spring of last year. “We’re excited to work with our partners at Altamont Capital Partners and Fortress Investment Group to continue on that path of growth on the other side of the pandemic, and we want to ensure the public that we expect no disruption to our business and no impact on franchise operations, employees and customers in our locations that are currently operating.”
“Because of the increase in vaccination availability, a very exciting slate of new releases, and pent-up audience demand, we’re extremely confident that by the end of 2021, the cinema industry—and our theaters specifically—will be thriving,” added Tim League, Alamo Drafthouse founder and executive chairman. “We are fortunate to have an incredibly talented and passionate team who are eager to welcome our loyal fans back to our theaters for a cinematic experience that can’t be replicated. That said, these are difficult times and during this bankruptcy we will have to make difficult decisions about our lease portfolio. We are hopeful that our landlord and other vendor partners will work with us to help ensure a successful emergence from bankruptcy and viable future business.”