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.
The move is part of a "proactive step" the company
said 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 quarter earnings
report, citing its attempts with holders of its senior secured notes due in
2025 and convertible senior notes due in 2026 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
$3.8 billion merger attempt with JetBlue with the U.S. Department of
Justice ruled against in January 2024. The carriers appealed the decision, but in
March called off their merger for good.
The company's letter to customers said that they could
continue to use all tickets, credits and loyalty points "as normal"
and continue to benefit from the Free Spirit loyalty program, Saver$ 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."