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Spirit Airlines is set to exit Chapter 11 bankruptcy as a private company after a U.S. bankruptcy judge approved the carrier’s restructuring plan Thursday.
As part of Spirit’s restructuring plan, the airline will exit bankruptcy through a take-private deal backed by lenders. Spirit’s top bondholders, which include Citadel Advisors, Pacific Investment Management Co., Western Asset Management Co., and UBS Asset Management, will receive control of the company.
Spirit said it expects to emerge from Chapter 11 bankruptcy in the coming weeks.
The deal allows Spirit to convert $795 million of debt into equity and includes a proposal to raise $350 million in additional financing through equity shares.
“We will emerge as a stronger airline with the financial flexibility to continue providing Guests with enhanced travel experiences and greater value,” said Spirit CEO Ted Christie in a statement.
Spirit Rejects Frontier
U.S. bankruptcy judge Sean Lane approved Spirit’s restructuring plan after the carrier rejected multiple bids from Frontier Airlines to merge.
Frontier proposed to take up to $400 million in debt and offer Spirit’s shareholders a 19% stake in the company. Spirit said it would proceed with its plan to exit bankruptcy as a standalone carrier after Frontier rejected a counterproposal that would have increased the debt and equity offerings.
And it appears that Frontier is no longer interested in making any new offers for Spirit. Frontier CEO Barry Biffle said at the Barclays industrials conference Wednesday that he expected Frontier to benefit from Spirit’s plan to proceed as a standalone carrier.
“That’s going to be good for us, ironically, but I think it’s probably bad for them over time,” Biffle said at the conference. “But at the end of the day, that’s what they wanted to do. And so we wish them luck.”
Spirit filed for Chapter 11 bankruptcy in November, months after its proposed merger with JetBlue was struck down in federal court. The ultra-low-cost carrier has struggled to turn a profit as the airline industry continues to see sustained demand for premium and international travel. Pratt & Whitney engine issues have also further hampered Spirit’s bottom line.
Part of Spirit’s plan as a standalone carrier includes reforms to its loyalty program and network. In regulatory filings, Spirit also said it would offer free Wi-Fi and snacks on board. The airline also said it would cut 200 jobs in an effort to further cut costs.
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