Spirit Airlines Secures Private Takeover Deal in $795M Bankruptcy Exit, and More
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Bondholders Take Control as Spirit Airlines Wins Court Approval for Chapter 11 Bankruptcy Exit
Spirit Airlines has secured approval from U.S. Bankruptcy Judge Sean Lane to exit Chapter 11 bankruptcy as a private company through a comprehensive restructuring plan.
The plan involves converting $795 million of debt to equity and raising $350 million in new financing through equity shares, with control transferring to major bondholders, including Citadel Advisors, Pacific Investment Management Co., and UBS Asset Management.
The airline expects to emerge from bankruptcy within weeks, after rejecting multiple merger attempts from Frontier Airlines.
Key Points
- The restructuring plan voids existing equity shares and transfers ownership to Spirit's creditors
- A new $300 million revolving credit facility will be established
- Spirit will issue $840 million of new senior secured debt to existing bondholders
- Around 200 jobs will be cut, primarily in administrative and management positions
- The company filed for bankruptcy in November 2024. Its earlier proposed merger with JetBlue was also blocked by federal courts
- Spirit also rejected multiple merger bids from Frontier Airlines, including a recent merger proposal that offered $400 million in debt and a 19% stake
- The airline plans to enhance the passenger experience with free WiFi, complimentary refreshments, and a new premium economy product as a refreshed comeback
What It Means
This restructuring gives Spirit a fighting chance at survival, though significant challenges remain.
The debt-to-equity conversion and additional funding provide crucial financial breathing room, but the airline must execute flawlessly on its planned service improvements and cost reductions.
While rejecting Frontier's merger offers shows confidence, I think Spirit's long-term viability as a standalone carrier still faces an uphill battle.
