Spirit Airlines Inc has filed for bankruptcy protection under a bondholder-backed restructuring plan aimed at slashing debt.
This follows a potential merger with Frontier Airlines falling through, following a long struggle to return to profitability from before the Covid pandemic, made worse this year by engine recalls.
Under the pre-agreed bankruptcy protection deal that was unveiled on Monday, bondholders will provide $300 million in debtor-in-possession financing before Spirit exits bankruptcy early next year.
Bondholders have also committed to a $350 million equity investment, which Spirit said would be used in a deleveraging transaction to equitize $795 million of funded debt.
“This set of transactions will materially strengthen our balance sheet and position Spirit for the future,” chief executive Ted Christie commented.
Spirit has faced years of widening losses since its last profit in 2019 and saw a planned $3.8 billion merger with JetBlue Airways (NASDAQ:JBLU) fall through in January.
Spirit last week delayed its latest quarterly filing as discussions with creditors were held.
Operations are expected to continue as normal despite the bankruptcy filing, Spirit said, while shares will be delisted from the New York Stock Exchange.
“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,” Christie added.