Even prior to the COVID-19 outbreak, department store giant Macy’s Inc. (NYSE: M) was struggling. The pandemic forced the company to close all 775 of its Macy’s and Bloomingdale’s stores and to delay the filing of its quarterly earnings report until at least July 1. The filing was due on June 11, but the company announced on May 7 that it would not meet that deadline “due to circumstances related to the novel coronavirus (COVID-19).”

The pandemic not only gets the blame for disrupting Macy’s operations but also for battering the share price. That’s not all: “The Company determined that a goodwill impairment triggering event occurred which will require an interim quantitative impairment assessment. As the market valuation of the Company’s common shares has continued to decline, the Company expects to incur a goodwill impairment charge in the 1st quarter of 2020.”

On April 17, Macy’s was reported to be seeking to raise cash from a debt sale backed by its real estate holdings and other assets. Macy’s did not deny the reports, and on May 7 it said that it was indeed seeking more financing “to meet its financial obligations.”

The worse news is that the company said on Thursday that its estimated first-quarter revenues would come in at around $3 billion, a sharp drop from the $5.5 billion reported in the same period of last year. Macy’s now expects an operating loss of $900 million to $1.1 billion in the quarter. CEO Jeff Gennette said the company has reopened about 190 stores since May 4 and expects another 80 to open for the Memorial Day holiday weekend.

If the company plans to back new debt with real estate assets, it might have a hard time persuading lenders of the value of that real estate. J.C. Penney, another venerable department store, was unable to secure a real-estate-backed loan earlier this year and ended up filing for bankruptcy last week.

Commercial real estate values have tanked since the COVID-19 outbreak. According to research firm Green Street Advisors, since beginning to slide in February, shopping mall equity values had dropped by 27% and the levered value of malls had fallen by more than 50% through mid-April.

Green Street analysts also expect malls to be hit harder than strip centers:

Department store bankruptcies are likely being pulled forward from the next five years to the next two, with Green Street now expecting over half of mall-based department stores to close by the end of 2021. This could trigger co-tenancy clauses for in-line tenants and accelerate the downfall of many malls across the country.

If Macy’s could have survived for five years by piling on more debt, its life expectancy has just shrunk to two years.

Although strip malls are expected to fare better, Green Street notes that strip mall real estate investment trusts generate about 30% of their rent from restaurants and other businesses that are threatened by bankruptcies due to the coronavirus outbreak. Commercial real estate, especially retail real estate, is in terrible shape right now.

In short, raising cash by selling debt backed with real estate assets is going to be expensive. If Macy’s has to close stores, it may not be able to generate enough cash to meet all its obligations. It’s a vicious circle, and escaping from it in any recognizable form will take extraordinary luck.

Macy’s shares traded down about 2% Friday morning, at $5.26 in a 52-week range of $4.38 to $23.40. The consensus price target on the stock is $7.77.

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