Spirit Airlines eyes restructuring with Chapter 11 filing and equity injection

Spirit Airlines, Inc. (NYSE:SAVE) shares are trading higher pre-market on Monday. The company disclosed a restructuring support agreement (RSA) with a supermajority of its loyalty and convertible bondholders to implement a extensive balance sheet restructuring.

The plan aims to reduce debt, increase financial flexibility, support long-term success and accelerate investments to improve guest travel experiences and value.

The company’s key actions include a backstopped equity investment of $350 million from existing bondholders and the equitization of $795 million in funded debt.

In addition, the bondholders are providing $300 million in DIP financing, supplemented by Spirit’s cash reserves and operating cash flow, to support the restructuring process.

Spirit has filed a plan of reorganization as part of its Chapter 11 process that incorporates the terms of the RSA and is awaiting court approval.

With the support of a supermajority of loyalty and convertible bondholders, the company expects to emerge from Chapter 11 in the first quarter of 2025.

First day applications are also filed to ensure normal business operations during the process.

As a result of the filing, Spirit expects to be delisted from the NYSE soon, where its common stock will continue to trade over-the-counter. The shares are expected to be canceled and have no value as part of the restructuring.

Ted Christie, Spirit’s president and CEO, said: “This set of transactions will significantly strengthen our balance sheet and position Spirit for the future as we continue to execute on our strategic initiatives to transform our guest experience, providing new enhanced travel opportunities, greater value and increased flexibility.”

Last week, Spirit filed the form, signaling that it may not submit its third-quarter 2024 earnings on time as the company has diverted resources from reviewing and finalizing financial statements to ongoing discussions on debt restructuring.

This happened after Spirit’s merger talks with Fronter Group Holdings Inc. and and its takeover of JetBlue Airways fell through.

Price action: SAVE shares are up 3.70% to $1.12 pre-market at last check on Monday.

Photo: Courtesy of Smart Calendar via Shutterstock

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