Alamo cinema chain files for Chapter 11.
Theater chain to close 3 locations but says no service disruptions expected
Alamo Drafthouse Cinemas, the theater chain launched nearly 25 years ago in Austin, sought bankruptcy protection Wednesday after it was unable to overcome challenges brought on by the pandemic.
As part of its Chapter 11 reorganization filing, Alamo Drafthouse is proposing to sell its assets under the supervision of the U.S. Bankruptcy Court in Delaware.
Alamo Drafthouse said in a statment it expects no disruption in operations, save for three theaters it’s pemanently closing. Those include its New Braunfels theater, which has been closed since the beginning of the pandemic, and the Alamo Drafthouse Ritz in Austin.
Alamo Drafthouse has three theaters in San Antonio — in the Park North shopping center at 618 NW Loop 410, in the Village of Stone Oak at 22806 U.S. 281 and Westlakes at 1225 SW Loop 410.
The chain recently settled litigation with its Park North landlord over unpaid rent. The theater stopped paying rent after it went dark last March as COVID-19 took hold in San Antonio.
The landlord, a company affiliated with Florida-based private equity real estate firm Sterling Organization, sued to collect more than $660,000 in rent payments from April to August. The suit was filed Aug. 20 in state District Court in San Antonio.
Alamo Drafthouse responded with a counterclaim Sept. 15, asking the court to enter a judgment declaring that the business was not obligated to pay rent from March until such time as the
court determined.
Alamo Drafthouse said it had been impossible for it to operate a movie theater while following social distancing guidelines. In addition, it said five major movie theater studios had stopped releasing films until late August.
The landlord didn’t accept the pandemic as an excuse for Alamo Drafthouse skipping rent, but the two sides earlier this year settled the dispute. Terms weren’t disclosed, but a lawyer for the chain said it would remain as a tenant in the shopping center.
Alamo Drafthouse’s bankruptcy petition lists the Park North landlord as an unsecured creditor, with a $488,500 claim. The Westlakes landlord is owed almost $711,500, while the Stone Oak landlord is owed about $795,500, the petition shows.
Some “difficult decisions” will have to be made regarding the chain’s lease portfolio, founder and Executive Chairman Tim League said in the statement.
“We are hopeful that our landlord and other vendor partners will work with us to help ensure a successful emergence from bankruptcy,” he said.
The San Antonio theaters have been operating on a reduced schedule of about three or four days a week since reopening. Theaters can currently operate at 75 percent capacity, but they can return to 100 percent next Wednesday as a result of Gov. Greg Abbott’s order lifting health safety restrictions.
Alamo Drafthouse listed assets and liabilities each in the range of $100 million to $500 million.
It operates 18 companyowned theaters and 23 franchised dine-in theaters in 13 markets.
In an affidavit, Alamo Drafthouse CFO Matthew Vonderahe said the company began 2020 in a strong financial position. However, it closed all of its theaters March 25, furloughed about 80 percent of its staff, reduced pay and negotiated rent deferrals with landlords and paused new theater development projects.
Alamo Drafthouse’s website shows it has had a new theater in the works for 15727 La Cantera Parkway.
The company reopened theaters to limited capacity in August, but Vonderahe said the “supply of films remained limited as production companies delayed new releases, and customer demand dwindled.”
By the end of last year, he added, “it became clear to (Alamo Drafthouse and related debtors) that they needed immediate relief from their overwhelming debt burden, as operational fixes were not enough to overcome the impact of COVID-19 and industry headwinds.”
Alamo Drafthouse has arranged for up to $20 million in financing that it can use to operate while pursuing reorganization efforts through a sale process. It wants to sell the assets to a group of senior lenders, League, and other original investors, according to the statement.
The “immediate objective is to maintain a a business-as-usual atmosphere during the early stages of the Chapter 11 Cases, with as little interruption or disruption to the Debtors’ operations as possible,” Vonderahe said.
Companies often file bankruptcy in the Delaware court because it has a reputation of being friendly to debtors.