Spirit Airlines revealed on Monday that it filed for Chapter 11 bankruptcy protection in an effort to reduce its debt and restructure the company.
In a Monday press release, Spirit Airlines announced it had “entered into a restructuring support agreement (the “RSA”) supported by a supermajority of Spirit’s loyalty and convertible bondholders on the terms of a comprehensive balance sheet restructuring.”
Spirit Airlines explained that the restructuring process is expected to help the company reduce its debt, provide better financial flexibility, and “position Spirit for long-term success and accelerate investments providing Guests with enhanced travel experiences and greater value. ”
Fox Business reported that the airline’s bankruptcy filing comes after two failed mergers with JetBlue and Frontier over the past couple of years, leaving the low-cost airline with repeated quarterly losses. The outlet noted that Spirit unveiled plans in October to implement layoffs and sell aircraft to raise the funding it needed to support its operations.
According to a court filing obtained by Fox Business, Spirit Airlines listed both its assets and liabilities as currently between $1 billion and $10 billion each.
In Monday’s press release, Spirit Airlines CEO Ted Christie explained that the airline had completed an agreement with a supermajority of the company’s bondholders on a “comprehensive recapitalization.”
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“This set of transactions will materially strengthen our balance sheet and position Spirit for the future while we continue executing on our strategic initiatives to transform our guest experience, providing new enhanced travel options, greater value and increased flexibility,” Christie said. “I’m extremely proud of the Spirit team’s hard work and dedication, which is key to our sustained progress in advancing our business and delivering for our guests.”
Monday’s press release noted that existing bondholders committed to providing a $350 million equity investment as part of the Chapter 11 bankruptcy protection agreement. Existing bondholders are also expected to provide Spirit Airlines with $300 million in debtor-in-possession financing.
Spirit Airlines expressed confidence that the additional financing combined with its current cash reserves and cash provided by the airline’s continuing operations will be enough to help the company navigate through the Chapter 11 bankruptcy process.
“Spirit expects to continue operating its business in the normal course throughout this prearranged, streamlined chapter 11 process,” Spirit Airlines stated. “Guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points as normal.”
