Alamo Drafthouse Cinema files for Chapter 11 bankruptcy, cites effects of coronavirus pandemic
Alamo Drafthouse Cinema announced Wednesday that it has voluntarily filed for bankruptcy as the coronavirus pandemic continues to have an effect on its business.
The Austin-based company also announced it entered into an purchase agreement for the sale of its assets to a senior lender group. The group includes Altamont Capital Partners, which was already an investor in the company, along with new investor Fortress Investment Group. Alamo Drafthouse co-founder Tim League, who is currently the company's executive chairman, is also part of the investor group.
The Alamo Drafthouse Ritz in downtown Austin, as well as locations in New Braunfels and Kansas City, Missouri, will be permanently closed. All other theaters that are currently open will continue to be open in accordance with local pandemic guidelines, the company said.
"The transaction will provide the company with much-needed incremental financing to stabilize the business during the pandemic, which has had an unprecedented and outsized impact upon the movie theater and dining industries," the company said in a written statement.
"More importantly, it will position Alamo Drafthouse to return to growth and continue executing on its long-term strategic vision," the statement continued.
Alamo said it will continue to evaluate all its leases during the bankruptcy process to determine additional lease terminations and to decide which locations will be part of the future business.
“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,” League said in a written statement.
Reached by phone Wednesday, League declined to comment further about the filing.
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Like all indoor movie theaters, Alamo Drafthouse has faced difficulties since last spring, when the pandemic put stress on the entertainment industry. After closing locations in March, the company declined to reopen its Texas theaters right away when Gov. Greg Abbott allowed indoor cinemas to resume operation. Alamo later reopened some of its locations late in summer 2020, with a detailed pandemic protocol plan.
In the meantime, Alamo Drafthouse laid off employees, created a COVID-19 relief fund, hired a new CEO, former Starbucks exec Shelli Taylor, as League stepped into a new role as executive chairman, and launched a streaming platform, Alamo On Demand. The brand's signature film festival, Fantastic Fest, moved to a primarily digital format in the fall. In October, a lawsuit filed against Alamo Drafthouse’s Mueller cinema accused the theater of failure to pay overdue rent and other expenses.
“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,” Taylor said in a written statement. “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.”
In an interview in October, League told the American-Statesman that the company expected to bounce back after the pandemic was under control. "We refuse to let this destroy us. We’re going to figure out how to come out of the debt hole that we’re in from closing the theater," he said.
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The company in November held an auction of movie posters from League's personal collection, with proceeds said to go toward compensating staff and paying debt and expenses accrued during the pandemic theater closures. At the time, League said in a statement that debt from accrued rent continued to mount for the chain.
After Abbott announced Tuesday that he was lifting the state's mask mandate and business capacity limits as the pandemic continues to rage, Alamo Drafthouse released a statement that it would keep its mask policy in place, as well as other safety measures. "We are only following the guidance of the CDC and medical experts, not politicians," the statement read. "Right now, at what we hope is the beginning of the end of COVID, the health of our teams and our guests remains this company's top priority.”
Alamo Drafthouse was founded by League and his wife, Karrie, in 1997 in Austin. Over almost a quarter of a century, it's grown into an influential nationwide chain and a pioneer of the dinner-and-a-movie model, also branching out into merchandising and film preservation arms.
The first Alamo Drafthouse location was on Colorado Street. With the closure of the Ritz on Sixth Street, which opened in 2007, the chain will no longer have a presence in downtown Austin. Prior to the pandemic, the chain operated 36 cinema-eateries in 22 markets across 10 states.