A bankruptcy auction for the Alamo Drafthouse theater chain has been canceled, after no rival bids were received for the company.
The cancelation clears the way for Fortress Investment Group and Altamont Capital to take control of the company, in a deal that also includes Alamo Drafthouse co-founder Tim League.
Alamo Drafthouse Cinema filed for bankruptcy on March 3, among a wave of theater chains that have gone under due to the pandemic. Studio Movie Grill and Cinemex have also declared bankruptcy, and earlier this month Pacific Theatres, which owns Arclight Theatres, announced that it would not reopen.
Alamo Drafthouse went bankrupt after being unable to renegotiate $105 million in debt. At the time of the bankruptcy announcement last month, the circuit said it would also close three theaters permanently, though the remaining locations will continue to operate.
A bankruptcy auction was scheduled to take place on Wednesday. But on Monday, the company’s lawyers disclosed that no competing qualified bids were received, and the auction was canceled.
That leaves Fortress and Altamont — which had submitted the stalking horse bid — as the lone bidder. The group holds the company’s long-term debt, and also agreed to provide up to $20 million in debtor-in-possession financing to keep the company operating while in bankruptcy. The group was set to use that DIP financing to credit bid for the company — effectively swapping its debt for equity in the reorganized company.
Altamont has been an investor in the company since June 2018. As the company’s liquidity crisis deepened last fall, the ownership group brought in Fortress — an investor in distressed debt — to help buy its long-term debt from Bank of America and other lenders.
League and Dave Kennedy, a longtime investor and board member, remain involved as minority partners with Altamont and Fortress. According to bankruptcy records, League bought 2.7% of the company’s debt.
A hearing has been set for May 3 in Delaware bankruptcy court to approve the sale to the stalking horse group led by Altamont and Fortress.