Spirit Airlines Gets Court Approval To Exit Bankruptcy in $795 Million Debt Deal

Spirit Airlines is getting ready to exit bankruptcy.

Reuters reports that a U.S. bankruptcy judge authorized Spirit Airlines’ financial restructuring on Thursday, allowing the low-cost airline to convert $795 million in debt to equity and emerge from bankruptcy as a private corporation.

During a White Plains, New York, court hearing, United States Bankruptcy Judge Sean Lane approved the airline’s restructuring proposal. Spirit’s bankruptcy plan cancels existing stock shares and transfers ownership to its lenders, which include investment funds run by Pacific Investment Management Company, UBS Asset Management, and Citadel Advisors.

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“We will emerge as a stronger airline with the financial flexibility to continue providing guests with enhanced travel experiences and greater value,” said Ted Christie, CEO of Spirit Airlines.

Spirit’s bankruptcy agreement includes a proposal to obtain $350 million in extra funding by issuing new equity shares. The airline has stated that it hopes to emerge from bankruptcy in the first quarter of 2025.

Spirit Airlines Recently Rejected Frontier Airlines’ Merger Acquisition Proposal

Just one week ago, the formerly embattled airline rejected Frontier Airlines’ merger acquisition proposal.

The buyout bid, worth roughly $2.16 billion, was rejected because it was less beneficial to shareholders than the company’s present reorganization strategy.

Frontier’s recent offer restated its proposal from earlier this month, in which Spirit’s stockholders would receive $400 million in debt and a 19% stake in Frontier.

However, it canceled Spirit’s mandate to perform a $350 million stock rights offering and use the proceeds to retire its debtor-in-possession facility. It also requested that the bankruptcy court waive the $35 million termination fee.

Spirit Airlines further stated that the updated proposal did not address some major risks and difficulties that it had previously addressed.

Instead, the Florida-based airline countered the proposal with a package that would provide Spirit owners $600 million in debt and $1.185 billion in equity, which Frontier declined.

“We remain convinced that the combination of Spirit and Frontier would have created more value than Spirit’s standalone plan,” Frontier said in a statement.

Despite similar operational practices, Spirit Airlines and Frontier Airlines serve slightly distinct markets. Spirit has long been a successful leisure airline, linking cities in the eastern and midwestern United States with sunny holiday locations in the American South, Mexico, and the Caribbean. Although the airline’s route network has changed, remnants of the previous model can still be traced in the current operational base network.