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Spirit Airlines announced yesterday that it had exited Chapter 11 bankruptcy protection and was moving forward. Under its plan, the company will go private (meaning no more stock), $795 million in debt will be wiped out, and $350 million in new money will be pumped into the company. If this will be enough to keep Spirit solvent is still up in the air.
Spirit shared the following financial plan:
Under the approved plan, Spirit will equitize $795 million of funded debt, receive $350 million of new equity investment, and issue $840 million aggregate principal amount of new senior secured debt to existing bondholders upon emergence. In addition, Spirit will enter into a new revolving credit facility of up to $300 million. Spirit vendors, aircraft lessors and holders of secured aircraft indebtedness will not be impaired. “
Ted Christie, Spirit’s President and Chief Executive Officer, said:
Today’s approval is a major milestone as we progress toward the successful conclusion of our in-court process. We will emerge as a stronger airline with the financial flexibility to continue providing Guests with enhanced travel experiences and greater value. Throughout this process, we’ve had virtually unanimous support from our bondholders, who recognize Spirit’s value and potential. As we move forward, our leadership team remains focused on reducing costs while also advancing our strategic initiatives to transform our Guest experience and position Spirit for success.
I’m especially grateful for the dedication and unwavering commitment of our entire Spirit Family, who continue their outstanding work to serve our Guests and drive our business forward.”
Control of the airline will go to Citadel Advisors, Pacific Investment Management Co., and Western Asset Management Co. Frontier Airlines has repeatedly made bids for the carrier. Spirit has rejected these offers each time they have been made. Frontier Group Holdings, Inc. announced that it was once again attempting to acquire Spirit Airlines earlier this month. It filed a Form 8-K with its intentions around a proposed merger with the Securities and Exchange Commission. Spirit fired back and rejected the offer. On February 4th, Frontier submitted a new proposal, but that was also rejected by Spirit.
Spirit wants to remain independent and it will be interesting to see how that fares. The airline has pivoted to eliminate many of its fees. It has also pushed to add more premium experiences and completely change its reputation of a low-cost carrier.
Anthony’s Take: We’ll see if Spirit can go it alone or if Frontier or another carrier comes through and makes a bid that the airline would actually accept. Time will tell how this all ends up, but it’s going to be a tough road even with so much of its debt restructured.
(Image Credits: Spirit Airlines.)
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2 comments
Perhaps I’m being simplistic but shouldn’t Spirit have figured out a plan to achieve profitability before exiting bankruptcy?
Sometimes an initial bankruptcy restructuring plan is put in place to plug the largest holes in the sinking ship, knowing full well that they’ll be entering bankruptcy court again. It’s double bankruptcy. The second one gets really messy.