Spain’s Abaco Group, one of the country’s biggest exhibitors, filed Monday for a suspension of payments — equivalent to Chapter 11.
Abaco, which is the property of risk capital firm Mercapital, owns 42 cinemas and more than 450 screens in Spain.
Company will call in an administrator, which will seek to restructure payments, eventually allowing Abaco to emerge from payment suspension.
Abaco is sitting down with the Spanish branches of the Hollywood studios to attempt to thrash out payment guarantees, which will allow it to continue to receive movies.
Abaco blames its dire financial troubles on piracy. After peaking in 2001 at 146.8 million, admissions in Spain have dropped in four of the next five years, reaching 121.65 million last year. According to a Gfk study, Spain saw 132 million unauthorized Internet downloads between July 2005 and June 2006. Illicit peer-to-peer transfers have escalated since then.
But piracy isn’t the whole story.
As Spain was swept by a property boom, Abaco expanded aggressively, renting multiplexes in new malls, just as Spain’s box office began to slump. Spain had 2,627 screens in 1997, 4,401 in 2005.
Bought up by equity firm Mercapital in 2005, Abaco undertook a costly purchase of rival Cinebox last year, paying E60 million ($81.1 million) for Cinebox’s 294 screens to create the biggest exhib in Spain. Abaco’s been caught paying costly rental fees in a highly competitive but ever softer market.
“There are just too many cinemas in Spain. The cost structures are very rigid because of long-term rent contracts with shopping malls. Getting out when things get worse costs a lot of money,” Manu Claessens, Kinepolis operations director in Spain, declared at a roundtable Tuesday in San Sebastian.
(Maria Alvarez Rilla contributed to this report.)