Spirit Airlines has disclosed that it has entered into a restructuring support agreement (RSA) that will be implemented while the airline company is in a pre-arranged Chapter 11 bankruptcy protection process in the US.
The airline confirmed today that its RSA is “supported by a supermajority of Spirit's loyalty and convertible bondholders on the terms of a comprehensive balance sheet restructuring”. The airline maintains that the restructuring will reduce Spirit's debt, provide increased financial flexibility, position Spirit for long-term success and accelerate investments.
In connection with the RSA, Spirit has received backstopped commitments for a $350 million equity investment from existing bondholders and says that the company will complete a deleveraging transaction to equitize $795 million of funded debt.
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.
Spirit plans to continue operating its business in the normal course throughout the restructuring process. The airline states that the Chapter 11 process “will not impact Team Member wages or benefits, which are continuing to be paid and honored for those employed by Spirit”. Spirit added that vendors, aircraft lessors and holders of secured aircraft indebtedness would also continue to be paid in the ordinary course and will not be impaired.
"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," said Ted Christie, Spirit's President and Chief Executive Officer. "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."
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.
In a letter to customers, Spirit said that the restructuring process is expected to complete in the first quarter of 2025.
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.