Spirit Airlines’ debt restructuring plan received approval from a U.S. bankruptcy judge on Thursday, paving the way for the budget carrier to convert $795 million of debt into equity and emerge from bankruptcy as a privately held company. The ruling, handed down by U.S. Bankruptcy Judge Sean Lane in White Plains, New York, cancels existing equity shares and transfers ownership to Spirit’s lenders. These lenders include investment funds managed by prominent firms such as Pacific Investment Management Company (PIMCO), UBS Asset Management, and Citadel Advisors.
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New Ownership and Funding for Spirit Airlines
The approved restructuring plan encompasses a provision to secure an additional $350 million in financing through the issuance of new equity shares. Spirit Airlines anticipates emerging from bankruptcy in the first quarter of 2025. In a statement released Thursday, Spirit Airlines CEO Ted Christie expressed confidence in the outcome, stating, “We will emerge as a stronger airline with the financial flexibility to continue providing guests with enhanced travel experiences and greater value.”
Rejected Acquisition Bid and Regulatory Hurdles
The bankruptcy proceedings followed Spirit’s rejection of a proposed acquisition by rival budget airline Frontier Group. Spirit maintained that the buyout offer undervalued the company compared to the debt restructuring plan. Frontier’s final offer would have granted Spirit Airlines a 19% equity stake in the combined entity. However, Spirit cited increased financial burdens associated with a prolonged bankruptcy period and heightened risks, including potential regulatory rejection of the merger by U.S. authorities.
Overruling Objections from SEC and US Trustee
Judge Lane indicated he would issue a formal written decision addressing objections raised by the U.S. Securities and Exchange Commission (SEC) and the Office of the U.S. Trustee, the bankruptcy watchdog arm of the U.S. Justice Department. Both government agencies contested the method by which Spirit’s bankruptcy plan released legal claims held by shareholders and creditors against non-debtor parties, such as Spirit’s lenders and executives. The SEC and U.S. Trustee argued that Spirit improperly presumed creditor “consent” to the agreement unless an “opt-out” form was submitted.
Spirit Airlines Poised for a Fresh Start
With the court’s approval, Spirit Airlines is now positioned to restructure its finances, strengthen its operations, and continue serving its customer base. The conversion of debt to equity and the influx of new capital will provide the airline with much-needed financial stability as it navigates the competitive landscape of the airline industry. The successful restructuring marks a significant turning point for Spirit Airlines, allowing it to move forward with a cleaner balance sheet and a renewed focus on its long-term strategic goals. The airline’s emergence from bankruptcy under private ownership represents a new chapter in its history, and its future performance will be closely watched by industry analysts and investors alike.
