Spirit Airlines' Shares Plummet Amid Bankruptcy Filing Speculations

WSJ Report Sparks Concerns

Spirit Airlines' shares experienced a significant drop in premarket trading in New York, following a report by the Wall Street Journal. The report suggested that the beleaguered airline has been in discussions with bondholders about a possible bankruptcy filing, in the wake of its failed merger with JetBlue Airways. The report was released late on Thursday evening.

Details of the Discussions

According to the report, the budget airline has been considering restructuring its balance sheet through an out-of-court transaction. However, recent discussions have been more centered on reaching an agreement with bondholders and other creditors to back a chapter 11 filing. The sources indicated that if such a filing were to occur, it wouldn't be immediate.

Record Low Share Prices

In premarket trading, shares were around $1.54, marking a decline of just over 31%. At one point, shares plummeted as much as 42%, setting a new record low for Spirit in its 13 years of public trading. According to the most recent data from Bloomberg, about 31.6 million shares are short, which is approximately 29.25% of the float.

Financial Difficulties for Spirit

The Wall Street Journal highlighted the financial difficulties faced by Spirit. The airline has been grappling with losses and decreasing revenue as it tries to manage its $3.3 billion debt, which includes more than $1.1 billion of secured bonds due in less than a year. Furthermore, Spirit is facing a deadline from its credit-card processor to refinance or extend these notes by October 21.

Failed Merger with JetBlue Airways

The potential bankruptcy filing follows Spirit's unsuccessful merger with JetBlue Airways earlier this year. The merger was blocked by Biden's Department of Justice due to concerns about reduced competition. In August, Spirit's CEO, Ted Christie, mentioned that the airline was in talks with bondholders to address the maturities, but did not provide further details.

Bottom Line

The future of Spirit Airlines hangs in the balance as it grapples with financial difficulties and the possibility of bankruptcy. The airline's shares have taken a significant hit, and its financial struggles are a cause for concern among investors. What are your thoughts on this development? Do you think Spirit Airlines can recover from this financial crisis? Share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, available every day at 6pm.