By Rick Archer

Law360 (March 3, 2021, 10:40 AM EST ) Movie theater chain Alamo Drafthouse Cinemas filed for Chapter 11 protection in Delaware bankruptcy court Wednesday with nearly $123 million in debt and a plan for a sale to a pair of investment firms, saying the strain of COVID-19 closures had become too great.

Alamo, the largest privately-owned theater chain in the U.S., said in its bankruptcy filings that it has a plan support agreement for a sale to affiliates of private equity firm Altamont Capital Management and investment management firm Fortress Investment Group that it hopes to conclude in the next 75 days.

"The Chapter 11 filing will allow the company to finalize the transaction through a court-supervised process while also enabling the company to strengthen its balance sheet and complete its financial restructuring this spring," the company said in a statement Wednesday.

Austin, Texas-based Alamo was founded in 1997 and currently operates 18 company-owned theaters and 23 franchise locations nationwide. Known for offering full meal and alcohol service at its theaters, the company also operates a movie merchandise store and an annual genre film festival, Fantastic Fest.

As of the filing date, the company owes $78.1 million on a term loan, $29.6 million on a development loan and $5 million on a revolving line of credit, according to its filings. The company also said it has taken out a $10 million Paycheck Protection Program loan for which it is seeking partial forgiveness.

In a Chapter 11 declaration, Chief Financial Officer Matthew Vonderahe said the company had its strongest year ever in 2019, but that the shutdown of all its theaters in March 2020 left its liquidity "seriously compromised" by the summer.

He said it attempted to make up the revenue by offering private theater rentals and starting its own on-demand video service, and that as of the filing date, 17 of its theaters have reopened with limited capacity.

"Nevertheless, supply of films remained limited as production companies delayed new releases, and customer demand dwindled," he said.

As a result, it began restructuring talks with its stakeholders, culminating in a restructuring support agreement with current investor Altamont and new investor Fortress for a sale of its assets in Chapter 11.

The company said it has secured $20 million in debtor-in-possession financing to continue operations though the bankruptcy.

In the announcement, the company said it will be permanently closing two Texas theaters and one in Missouri and would "evaluate the health of all leases" to see if any additional closures are necessary.

"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," Tim League, founder and executive chairman of Alamo, said in the release.

COVID-19 has had a severe impact on theater chains. Cinemex Holdings USA filed for Chapter 11 protection in April, while in January AMC Entertainment announced it had raised $917 million in new debt and equity in its attempt to ride out the pandemic.

The company has retained Portage Point Partners as its financial adviser and Houlihan Lokey Capital as its investment banker.

Alamo is represented by Betsy L. Feldman, M. Blake Cleary, Matthew B. Lunn, Kenneth J. Enos and Jared W. Kochenash of Young Conaway Stargatt & Taylor LLP.

The case is In re: Alamo Drafthouse Cinemas Holdings LLC, case number 21-10474, in the U.S. Bankruptcy Court for the District of Delaware.

--Editing by Alyssa Miller.

Update: This story has been updated with additional information from court filings and company statements.

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