“Even if you sell out every seat in the house, you’re still gonna lose money with that much debt,” chairman of Wilk Auslander’s bankruptcy department Eric Snyder says

AMC Theatres is “likely” to face bankruptcy, analysts say, but the nation’s largest cinema chain was at risk long before the coronavirus pandemic shut down its theaters.

AMC tallied roughly $5 billion in debt at the end of 2019 and losses of $149 million — that was after recording a $110 million profit in 2018. And during the company’s most recent fourth quarter conference call, AMC CEO Adam Aron said that he and other top executives had agreed to cut their salaries and bonuses for three years. That was all before the pandemic shutdown choked its revenue stream altogether.

“Bankruptcy is likely, but it’s not necessarily related to the pandemic,” said Eric Snyder, partner at Wilk Auslander and chairman of the firm’s bankruptcy department. “With so much competition from streaming there’s no way they can pay that off… Even if you sell out every seat in the house, you’re still gonna lose money with that much debt.”

AMC did not respond to TheWrap’s request for comment.

Also Read: AMC's Credit Rating Downgraded by S&P With Recovery Unlikely

The novel coronavirus pandemic has shown a light on AMC’s precarious situation. Last week, The Wall Street Journal reported that AMC’s lenders had hired lawyers from law firm Gibson, Dunn & Crutcher LLP to advice on a restructuring.

S&P Global also downgraded its credit rating for AMC from B to CCC-, which took the company from “highly speculative” to “default imminent, with little prospect for recovery.” Experts have been spelling doom for AMC for a while.

“Clearly, there is always the possibility of AMC seeking bankruptcy given all of the unknowns remaining, including when theaters will be allowed to reopen, what the slate will look like and how consumers will respond initially,” said B. Riley FBR analyst Eric Wold, who is slightly more optimistic about AMC’s outlook. “Given the company’s outstanding debt and significant fixed rent expense, that was one of the main factors behind our downgrade to neutral — as we saw risk to the equity under a restructuring scenario.”

In recent weeks, after already being forced to shut down theaters indefinitely nation wide, AMC has had to furloughed more than 24,000 employees, including CEO Adam Aron. And Deadline reported that the cinema chain also sent letters to its landlords, telling them AMC would no longer be able to pay rent on its theaters until they reopen.

“Based on our calculations, we estimate that the elimination (deferral) of monthly rent payments alone would essentially double the number of months that AMC could survive without any revenue and without any liquidity event,” Wold wrote in a note to clients on Wednesday.

Also Read: Cinemark Stock Rebounds, Analyst Upgrades Movie Theater Company to Buy

At this point, AMC doesn’t have many options left, according to Snyder. It could try to reorganize around the same equity, which isn’t likely to help; or sell its assets, but it could have a hard time finding a buyer. What Snyder said AMC will likely end up doing is deleverage and sell debt for equity.

“They’re not going to go through bankruptcy to sell, because there’s no buyers,” Snyder said. “They’re likely going to try to deleverage the company to buy them some time, but there are fundamental issues with the company that a bankruptcy will allow them to address.”

AMC has spent millions of dollars to build up its A-List frequent-moviegoer subscription service, an alternative to the now-defunct MoviePass that has lured 900,000 subscribers since its June 2018 launch but only turned a profit in the most recent fourth quarter.

In recent years, the company has also gone on an acquisition spree, buying Odeon and UCI Cinemas Holdings along with Carmike Cinemas in 2016, and Nordic Cinema Group in 2017.

Also Read: Movie Theater Seating Manufacturer VIP Cinemas Shuts Down for Good Due to Pandemic

For a while, AMC had a financial parachute from Chinese conglomerate Dalian Wanda, which acquired a majority stake in 2012. But in 2018 Wanda scaled down its position in the theater chain as Chinese regulators incentivized companies to cut back on foreign holdings. AMC then turned to private equity firm Silver Lake, closing a $600 million investment in September 2018.

AMC will almost certainly seek relief from the $2 trillion stimulus bill that was applauded by the National Association of Theater Owners. The lobby group said that the loan programs that will be established as part of the legislation will provide movie theater companies with much-needed support to remain solvent during the coronavirus pandemic. NATO also established a $2.4 million fund last week to provide financial support to movie theater employees who are now without any income because of theater closures.

“If [AMC] are able to get relief from their landlords and/or from the stimulus package, then I see an opportunity to get through this if we only have a limited shutdown period,” Wold said. “Frankly, given that landlords would likely be the most at risk under a bankruptcy and knowing that landlords funded $550 million of AMC’s theater remodels over the past five years, I would be surprised if they would not be flexible and help them get through this. With that in mind, I think AMC’s chances of avoiding bankruptcy have now improved.”