Spirit Airlines, Inc., amid struggles with mounting losses and debt, has filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York.
The restructuring is expected to reduce Spirit’s debt and provide increased financial flexibility. In an open letter to all Spirit Guests, the company called the process a proactive step to position it for success.
In the pre-market activity on the NYSE, Spirit shares were losing around 5.6 percent to trade at $1.02. On last Friday, the shares had plunged around 18.2 percent to close at $1.08.
In March 2024, Spirit’s merger agreement with JetBlue Airways was cancelled, following a U.S. court’s decision to block the deal over anti-competition concerns.
In a statement announcing the process, the budget airline now said it expects to continue operating its business in the normal course throughout the prearranged, streamlined chapter 11 process, which is expected to complete in the first quarter of 2025.
The company has entered into a restructuring support agreement or RSA supported by a supermajority of Spirit’s loyalty and convertible bondholders on the terms of a comprehensive balance sheet restructuring.
Spirit has received backstopped commitments for a $350 million equity investment from existing bondholders. It will complete a deleveraging transaction to equitize $795 million of funded debt.
In addition, existing bondholders are providing $300 million in debtor-in-possession or DIP financing. This, together with Spirit’s available cash reserves and cash provided by operations, could further support the company through the chapter 11 process.
As a result of the filing, the low-fare carrier expects to be delisted from the New York Stock Exchange in the near term. Its common stock will continue to trade in the over-the-counter marketplace through the process.
Spirit said its customers can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal. Also, the chapter 11 process itself will not impact Team Member wages or benefits, which are continuing to be paid. Vendors, aircraft lessors and holders of secured aircraft indebtedness will also continue to be paid in the ordinary course and will not be impaired.
Ted Christie, Spirit’s President and Chief Executive Officer, said, “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. This set of transactions will materially strengthen our balance sheet and position Spirit for the future while we continue executing on our strategic initiatives..”
Spirit, which has been reporting losses for the past few quarters, in late October had revealed in a regulatory filing that it identified around $80 million in annual cost reductions, set to begin in early 2025, as part of its strategy to return to profitability. These cost reductions were to primarily result from a workforce reduction aligned with the company’s expected flight volume.
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