MW Spirit Airlines files for bankruptcy after tumultuous period in which two attempted mergers fell through
By Steve Goldstein and Ciara Linnane
Move will allow Spirit to restructure and reduce its debt burden while its planes keep flying
Spirit Airlines Inc. filed for a voluntary, pre-arranged Chapter 11 bankruptcy early Monday, after reaching an agreement with its bondholders, capping a tumultuous period for the low-cost airline in which efforts to merge with two rivals fell through.
Spirit said it has backstopped commitments for $350 million in an equity investment from its existing bondholders, and $300 million in debtor-in-possession financing, a special type of loan used in bankruptcy proceedings.
The move was expected. Spirit $(SAVE.AU)$ said in a recent regulatory filing that it had been in active talks with holders of its senior secured notes that mature in 2025 and convertible bonds that mature in 2026 with a view to restructuring the debt and exploring other ways to boost liquidity.
"Spirit expects to continue operating its business in the normal course throughout this prearranged, streamlined chapter 11 process," the airline said in a new filing on Monday. "Guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal."
The restructuring is expected to reduce Spirit's debt, provide financial flexibility and position the airline for long-term success. The company has about $3.2 billion of outstanding debt, according to FactSet.
The company has the support of a supermajority of its bondholders and expects to emerge from a streamlined Chapter 11 process in the first quarter of 2025.
In addition to the equity investment, the company will complete a deleveraging transaction to equitize $795 million of funded debt. The bankruptcy filing is with the U.S. Bankruptcy Court for the Southern District of New York.
"I am pleased we have reached an agreement with a supermajority of both our loyalty and convertible bondholders on a comprehensive recapitalization of the company, which is a strong vote of confidence in Spirit and our long-term plan," Chief Executive Ted Christie said in prepared remarks.
The company is expecting its stock to be delisted from the New York Stock Exchange and will move to the over-the-counter market.
Spirit had warned that its equity would be wiped out in the event of a bankruptcy. The stock still rose 3.7% in recent premarket trade on Monday.
The news comes about a week after the Wall Street Journal reported that talks with Frontier Group Holdings Inc. $(ULCC)$ on a potential merger with its fellow discount airline had fallen through.
The pair had been discussing plans to revive an earlier proposal to merge, but Frontier decided not to move forward, the Journal reported, citing people familiar with the matter.
The embattled Spirit unveiled plans last month to lay off employees, scale back flights and sell jets.
The airline had been seeking a lifeline after its failed merger with JetBlue Airways Corp. $(JBLU)$ earlier this year.
Shares of Frontier climbed 6.8% in Monday's premarket, and JetBlue's stock rose 1.7%.
Besides JetBlue's decision in March to abandon plans for the deal after regulators sought to block the merger, Spirit has faced competition from larger airlines offering their own discounted fares and issues with its Pratt & Whitney $(RTX)$ aircraft engines.
-Steve Goldstein -Ciara Linnane
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(END) Dow Jones Newswires
November 18, 2024 06:48 ET (11:48 GMT)
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