Spirit Airlines announced on Monday morning in a letter to customers that it had filed with the U.S. Securities and Exchange Commission for a "prearranged" Chapter 11 bankruptcy.
Spirit said the move is part of a "proactive step" that also includes a restructuring support agreement "supported by a supermajority" of its bondholders that is "expected to reduce our total debt, provide increased financial flexibility, position Spirit for long-term success and accelerate investments providing guests with enhanced travel experiences and greater value."
As part of the agreement, the carrier received "backstopped commitments for a $350 million equity investment from existing bondholders and will complete a deleveraging transaction to equitize $795 million of funded debt." Existing bondholders also are providing $300 million in debtor-in-possession financing, which with Spirit's available cash reserves and cash provided by operations is expected to further support the company through the Chapter 11 process.
About a week ago, Spirit delayed its quarterly earnings report, citing its attempts with bondholders to restructure the obligations and explore "strategic alternatives and other ways to improve liquidity for the company." It also noted that third-quarter operating revenues were down about $61 million year over year due to lower average yield, the negative affect of no longer charging change and cancellations fees, along with increased operating expenses.
As part of the Chapter 11 filing, Spirit expects to be delisted from the New York Stock Exchange in the near future.
Rumors have swirled for months that Spirit would need to file for bankruptcy amid quarterly losses and following its failed $3.8 billion merger attempt with JetBlue, which the U.S. Department of Justice ruled against in January 2024. The carriers appealed the decision, but in March called off their merger for good.
The company's letter to customers said that they could continue to use all tickets, credits and loyalty points as normal and continue to benefit from the Free Spirit loyalty program, Savers Club perks and credit card terms.
Spirit projects it will complete the process in the first quarter of 2025 "and emerge even better positioned to deliver the best value in the sky."
Source: Business Travel News