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Spirit Airlines’ US Chapter 11 reorganisation: debt-for-equity swap, new financing and failed mergers expose ultra-low-cost model fragility and raise consolidation and Chapter 22 risks

Published on: 03 March 2025

Published by a Law360 reporter

Legal News

Article summary

After stepping away from merger talks with low-cost peer Frontier, Spirit proceeded with a Chapter 11 plan that it said would significantly reduce leverage and set it up for long-term success. The carrier trimmed US$795m from its US$3.6bn liabilities, yet emerges into challenging macroeconomic conditions, experts noted. Spirit, which declined to comment on 27 February 2025, will swap US$1.6bn of secured borrowings for US$840m of new five-year exit notes and equity. It will also clear a US$300m revolving credit facility at emergence, replace it with a new US$275m revolver, and secure US$350m in fresh equity. ‘It certainly marks progress for Spirit to have both converted sizeable debt to equity and attracted an equity injection’, bankruptcy lawyer Anthony Sabino of Sabino & Sabino PC told Law360. ‘So, the overarching question is, “Will it suffice?”’ As of the petition date, Spirit held US$2.9bn in secured obligations, according to the disclosure statement. The precise post-confirmation debt figure was not immediately available on 27 February 2025. On the remaining balance after the restructuring, Sabino observed: ‘For airlines, that is not as cataclysmic as it appears’...

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