Spirit Airlines files for bankruptcy, plans major debt restructuring

Investing.com — Spirit Airlines , Inc. (NYSE:SAVE) has filed for Chapter 11 bankruptcy protection as part of a prearranged restructuring plan aimed at reducing its debt burden and positioning the company for long-term success. 

The airline, which has long marketed itself as a low-cost carrier, announced that it has reached a Restructuring Support Agreement (RSA) with a supermajority of its loyalty and convertible bondholders. 

The agreement outlines a sweeping plan to improve Spirit’s financial flexibility and enhance its travel offerings for customers.  

In a statement, Spirit said that the restructuring would allow the company to continue operations seamlessly while implementing key financial improvements. 

Under the terms of the RSA, Spirit has secured backstopped commitments for a $350 million equity investment from its bondholders. 

Additionally, the airline will execute a deleveraging transaction that will equitize $795 million in funded debt. 

Spirit has also secured $300 million in debtor-in-possession financing from its bondholders to support its operations during the Chapter 11 process, along with its existing cash reserves and operational cash flow.  

Despite the bankruptcy filing, Spirit reassured passengers and employees that its operations would remain unaffected. 

“Guests can continue to book and fly without interruption and can use all tickets, credits, and loyalty points as normal,” the company said. 

Additionally, the airline confirmed that wages and benefits for employees would not be impacted, and payments to vendors, aircraft lessors, and holders of secured aircraft debt would continue as usual.  

“This set of transactions will materially strengthen our balance sheet and position Spirit for the future while we continue executing on our strategic initiatives to transform our Guest experience, providing new enhanced travel options, greater value and increased flexibility,” said Ted Christie, Spirit’s President and CEO.

As part of its Chapter 11 filing, Spirit has submitted a proposed Plan of Reorganization that incorporates the terms of the RSA. 

The company expects to exit the bankruptcy process by the first quarter of 2025, contingent on the plan’s confirmation by the U.S. Bankruptcy Court for the Southern District of New York. 

Spirit has also filed a series of first-day motions designed to facilitate its operations during the bankruptcy process, ensuring minimal disruption to its business.  

However, as a result of the filing, Spirit anticipates being delisted from the New York Stock Exchange. 

The company said that it expects its common stock will continue trading on the over-the-counter market throughout the Chapter 11 process. 

However, as part of Spirit’s restructuring, these shares are expected to be cancelled and rendered worthless.

Shares of the low cost airline was trading higher at 2.8% on Monday.