Spirit Airlines Shares Plunge 37% Following Possible Bankruptcy Filing Reports

Shares of Spirit Airlines experienced a significant decline, losing over 37% of their value in premarket trading on Friday. This drop comes amid reports that the struggling airline is in negotiations with bondholders regarding a potential bankruptcy.

The ultra-low-cost airline has been attempting to restructure its debt to avoid filing for bankruptcy. However, recent discussions have reportedly shifted toward a deal that may support a Chapter 11 filing, according to sources familiar with the matter. The timing of any potential filing, should it occur, is not expected to be immediate.

Bloomberg News also reported that negotiations to secure a deal for debt restructuring have stalled. Prolonged discussions with the company’s bondholders have yet to result in an agreement.

Spirit’s leadership is seeking fresh financing from creditors and an extension on its existing debt. However, key agreements are pending regarding which assets bondholders might claim and the amount of new financing that Spirit could receive.

CEO Ted Christie recently informed analysts that talks with bondholders regarding upcoming debt maturities due in 2025 and 2026 are “ongoing.” He emphasized his commitment to achieving the best possible outcome for the business in a timely manner.

The airline has been under scrutiny regarding potential bankruptcy since a proposed $3.8 billion merger with JetBlue was blocked earlier this year by a U.S. judge due to antitrust concerns. This merger would have significantly bolstered Spirit during a challenging period marked by high cash burn and considerable debt.

According to reports, Spirit Airlines has about $3.06 billion in long-term debt and finance leases, excluding current maturities, as of its fiscal 2023 year.