Spirit Airlines is closing in on a restructuring agreement with bondholders, a move that would likely result in a bankruptcy filing.
A source familiar with the matter said Spirit expects the restructuring to have no impact on customers, with bookings and flights continuing as normal.
In a Nov. 12 regulatory filing with Securities and Exchange Commission, Spirit said that it has been in negotiations with a supermajority of its bondholders concerning notes that come due in 2025 and 2026, including $1.1 billion in loyalty program-backed debt that comes due next year.
Spirit said that should it reach an agreement with bondholders, the deal would be effectuated through a restructuring that wipes out shareholders. However, the arrangement is not expected to impair unsecured creditors, employees, customers, aircraft lessors, suppliers or vendors.
"If a definitive agreement with the noteholders is not reached, the company will consider all alternatives," the filing reads.
The announcement sent Spirit shares into a tailspin; they were down more than 50% in morning trading.
The Wall Street Journal reported in late October that merger talks had resumed between Frontier and Spirit. But on Tuesday, the WSJ reported that Frontier had decided not to go forward with an acquisition, leaving a deal with bondholders as Spirit's primary remaining option. Frontier declined to comment.
Frontier, also an ultralow-cost carrier, had entered into an agreement to purchase Spirit in 2022, only to be outbid by JetBlue. In January, antitrust regulators at the Department of Justice prevailed in their suit to block the JetBlue-Spirit merger bid as anticompetitive.
Since then, Spirit has been working to preserve liquidity and stem losses.
During the first half of this year, Spirit recorded an operating loss of $360 million following an operating loss of $496 million in 2023.
Last month, Spirit reached an agreement to sell 23 Airbus planes for $519 million. The airline has also slashed flying by 20% in Q4. In August, it introduced a package of new fare bundles, as well as priority check-in lanes, in an effort to grow appeal among higher-spending flyers. The airline expects to end 2024 with $1 billion in liquidity, down from $1.3 billion at the end of 2023.
In its Tuesday regulatory filing, Spirit said that the company has been delayed in reporting its Q3 financial results while management's time has been taken up by negotiations with bondholders.
The company estimated that operating losses for the third quarter will be approximately $295 million with an operating margin of approximately minus-27%.