Spirit Airlines looking at potential bankruptcy

SPIRIT AIRLINES AIRBUSA321-231 N661NK (MSN 6867)

Spirit Airlines is negotiating with bondholders regarding the terms of a possible bankruptcy filing following the collapse of its merger with JetBlue Airways, as reported by the media on Thursday. This news caused a 30% drop in its share value during extended trading.

The company is also considering restructuring its balance sheet via an out-of-court deal, but recent discussions have shifted toward securing an agreement with bondholders and other creditors to back a Chapter 11 filing, according to reports, quoting sources knowledgeable about the situation.

The timing of such a filing, should it occur, is not considered imminent, as per the report.

Spirit Airlines referred to the company's second-quarter earnings call where CEO Ted Christie mentioned that the company was engaging with the advisers of its bondholders to address the upcoming debt maturities due in 2025 and 2026.

"Since those discussions are ongoing, we will not delve into details, respond to inquiries on this subject, or speculate on potential outcomes," Christie stated, emphasizing that it was a priority for the company to secure the "best outcome for the business as swiftly as possible."

The news of the potential bankruptcy surfaces months after Christie declared the airline was not contemplating a Chapter 11 bankruptcy and expressed optimism about the plan in place following the collapse of the deal with JetBlue.

JetBlue and Spirit terminated their $3.8 billion merger agreement in March after a U.S. judge halted the deal in January due to antitrust concerns.

Had the deal succeeded, it would have established the fifth-largest carrier in the United States and provided Spirit with an opportunity to persevere during a period of cash burn and significant debt.

Spirit has forecasted a steeper loss for the third quarter, primarily attributed to a fierce competitive struggle for price-sensitive leisure travelers and a surplus of airline seats in the domestic market.

Spirit has not reported a profit in five of the last six quarters, casting doubt on its debt servicing capability.

For fiscal year 2023, the airline reported approximately $3.06 billion in long-term debt and finance leases, not including current maturities.