Interest payments were already draining the bottom line at Cirque du Soleil Holdings LP before the COVID-19 pandemic froze its revenues, according to a report by the monitor in its bankruptcy protection case.

Ernst & Young, the firm overseeing Cirque’s restructuring under the Companies’ Creditors Arrangement Act in Canada, said its net loss increased to US$80 million last year from US$10.2 million in 2017.

“During that period, the applicant’s financial position deteriorated as a result of the losses sustained and the increasingly debt heavy capital structure,” the monitor said in a report.

The pandemic hit the 36-year-old company just as it emerged from a string of acquisitions that helped it diversify from its original acrobat-based shows. The deals, which included Blue Man Productions Inc., help Cirque increase revenue to US$1.04 billion last year from US$882 million in 2017, but also put it deeper into debt.

As of March 31, Cirque owed its first lien creditors US$901 million and its second lien creditors US$154 million. It also owed US$32 million to shareholder Caisse de Depot et Placement du Quebec and an equal amount to Fonds de solidarite des travailleurs du Quebec, the monitor’s report said.

Montreal-based Cirque filed for protection from creditors on Monday after the coronavirus forced it to close shows around the world. A creditors’ group has said a proposal by existing shareholders — TPG, the Caisse and China’s Fosun International Ltd. — to restructure the live performance company is “doomed to fail” and there is no chance they will accept it.

The shareholders’ group proposed refinancing the company with new capital and giving creditors a 45-per-cent equity stake in exchange for wiping out most of its debt. Now the company will go through a process to see if another investor can improve on that offer.

Cirque had US$1.47 billion in liabilities at the end of 2019, about five times shareholders’ equity.

Ernst & Young said in the report it worked with the shareholders on their so-called stalking horse bid and considers the terms to be “fair” and “reasonable”. The monitor said it’s in the best interest of the company that a sale process is done quickly.