Airline carrier Spirit Airlines securures judicial endorsement for its $795 million debt restructuring plan.
In a court hearing held in White Plains, New York, Bankruptcy Judge Sean Lane gave the green light to Spirit Airlines' restructuring plan. This move cancels the airline's existing equity shares and hands ownership over to its lenders, which include investment funds managed by Pacific Investment Management Company, UBS Asset Management, and Citadel Advisors.
The bankruptcy deal includes a proposal for Spirit to raise $350 million through the sale of new equity shares. The budget airline aims to exit bankruptcy in the first quarter of 2025. Spirit CEO Ted Christie stated, "We will emerge as a stronger airline with the financial flexibility to continue providing guests with enhanced travel experiences and greater value."
Previously, Spirit had rejected a proposed acquisition by fellow budget airline Frontier Group. Spirit believed that the proposed buyout offered less value to its creditors than the bankruptcy restructuring. Frontier's latest offer would have allowed Spirit to retain 19% of the company's equity, but Spirit argued it came with additional costs and risks.
Lane announced that he would issue a written decision to overrule objections raised by the U.S. Securities and Exchange Commission and the Office of the U.S. Trustee, which is the U.S. Justice Department's bankruptcy watchdog. These government agencies had opposed the way Spirit released shareholders' and creditors' legal claims against non-debtors like its lenders and executives.
Spirit was accused of improperly assuming creditor consent to the deal unless they returned a separate "opt-out" form. However, Lane indicated that he would side with Spirit, giving creditors the option to opt out of the release scheme. This decision will be formalized in his written ruling.
The bankruptcy plan offers Spirit Airlines the opportunity to raise $350 million through the sale of new equity shares by 2025. Despite a proposed acquisition by Frontier Group earlier, Spirit chose bankruptcy restructuring, believing it offered more value to its creditors. Post-bankruptcy, Spirit aims to continue providing improved travel experiences, all while maintaining financial flexibility.
