Spirit Airlines entered into a restructuring support agreement (RSA) supported by a supermajority of Spirit’s bondholders on the terms of a balance sheet restructuring. The restructuring is expected to reduce Spirit’s debt, provide increased financial flexibility, position Spirit for long-term success and accelerate investments providing Guests with enhanced travel experiences and greater value._x000D_
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In connection with the RSA, Spirit has received backstopped commitments for a $350 million equity investment from existing bondholders and will complete a deleveraging transaction to equitize $795 million of funded debt. To implement the RSA, the company has commenced a prearranged chapter 11 process in the United States Bankruptcy Court for the Southern District of New York. Existing bondholders are also providing $300 million in debtor-in-possession (DIP) financing, which, together with Spirit’s available cash reserves and cash provided by operations, is expected to further support the company through the chapter 11 process._x000D_
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Spirit expects to continue operating its business in the normal course throughout this prearranged chapter 11 process. Guests can continue to book and fly without interruption and can use all tickets, credits and loyalty points. The chapter 11 process itself will not impact team member wages or benefits, which are continuing to be paid and honored for those employed by Spirit. Vendors, aircraft lessors and holders of secured aircraft indebtedness will continue to be paid in the ordinary course and will not be impaired._x000D_
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“I am pleased we have reached an agreement with a supermajority of both our loyalty and convertible bondholders on a comprehensive recapitalization of the company, which is a strong vote of confidence in Spirit and our long-term plan,” Ted Christie, president and CEO of Spirit, said. “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. 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.”_x000D_
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As part of the chapter 11 process, Spirit is filing a proposed plan of reorganization that incorporates the agreed terms of the RSA and is subject to confirmation by the court. The company has received support from a supermajority of its loyalty and convertible bondholders and expects to emerge from a streamlined chapter 11 process in the first quarter of 2025._x000D_
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In conjunction with the petition, Spirit has filed a series of first-day motions, which, once approved by the court, will further facilitate the company operating its business in the ordinary course during the streamlined chapter 11 process._x000D_
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As a result of the chapter 11 filing, Spirit expects to be delisted from the New York Stock Exchange in the near term. The company expects that its common stock will continue to trade in the over-the-counter marketplace through the chapter 11 process. The shares are expected to be cancelled and have no value as part of Spirit’s restructuring._x000D_
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Davis Polk & Wardwell is serving as the company’s restructuring counsel, Alvarez & Marsal is serving as restructuring advisor and Perella Weinberg Partners is acting as investment banker. Akin Gump Strauss Hauer & Feld is acting as legal counsel and Evercore is acting as financial advisor to the ad hoc group of loyalty noteholders. Paul Hastings is acting as legal counsel and Ducera Partners is acting as financial advisor to the convertible bondholders.
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