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March 3, 2021, 6:39 p.m. EST

Alamo Drafthouse plans bankruptcy sale

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By Jonathan Randles

Alamo Drafthouse Cinemas Holdings LLC, a theater chain offering moviegoers seat-side food service, beer and themed cocktails, has filed for bankruptcy while planning to sell the business to Fortress Investment Group LLC and other investors.

Austin, Texas-based Alamo became the latest theater business forced into chapter 11 as a result of seismic changes to the movie industry during the Covid-19 pandemic. Cinemas across the U.S. either remain closed or are operating at reduced capacity while major film studios either delay or bypass theater releases in favor of streaming services.

Alamo, which operates 41 company-owned and franchised cinemas, temporarily shut its locations last March and put in place a number of cost-saving measures to withstand the pandemic, including furloughing most staff. The company came up with ways to generate revenue as well, including renting out theaters for private screenings and launched a video-on-demand platform called "Alamo On Demand."

Despite these steps, a cash crunch continued throughout 2020 amid unprecedented industry conditions, Alamo Chief Financial Officer Matthew Vonderahe said in a declaration filed Wednesday in the U.S. Bankruptcy Court in Wilmington, Del.

The cinema chain got a $10 million coronavirus relief loan through the federal Paycheck Protection Program, court papers said, one of the hundreds of companies that have filed for bankruptcy after receiving the emergency lifeline.

Alamo has an agreement to sell the business to an investment group led by Fortress, Altamont Capital Management L.P., Alamo founder Tim League and other original investors. Under the restructuring deal, Alamo debt Fortress and the other investors own would be converted to equity in the reorganized business.

Alamo has lined-up a $20 million bankruptcy loan to fund the chapter 11 case and the business. The company will continue to operate during the bankruptcy, Alamo said. The chapter 11 process will allow it to shed locations as needed and get rent concessions from landlords, the company said. The chapter 11 loan, the proposed sale and any closures must be approved by a bankruptcy judge

In August, Alamo retained investment bankers and discussed its options for debt refinancing and additional liquidity. Even with the restructuring deal in-hand, Alamo intends to run a robust sale process while in chapter 11, overseen by a special board committee, to solicit better offers for the business, Mr. Vonderahe said.

The company has filed several customary motions to continue paying employee wages, certain vendors the company says are critical to its business and other ordinary expenses as it begins operating in chapter 11. The company has 107 full-time employees and roughly 205 part-time employees, court papers said.

Alamo is the latest theater business tipped into chapter 11. Dine-in movie-theater chain Cinemex Holdings USA Inc. won approval on a reorganization plan in November while VIP Cinema Holdings Inc., which makes reclining seats for movie theaters, filed for bankruptcy in the early days of the pandemic and shut down for good.

Meanwhile, WSJ Pro Bankruptcy reported in January that National CineMedia Inc., which runs advertisements on movie-theater screens, had hired lawyers to advise the company in debt talks with its lenders.

U.S. Bankruptcy Judge Mary Walrath has been assigned to the case, number 21-10474.

Alamo has retained the law firm Young Conaway Stargatt & Taylor LLP to represent the company in bankruptcy and Houlihan Lokey Capital Inc. as investment banker.

Write to Jonathan Randles at Jonathan.Randles@wsj.com

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