Spirit Airlines Shares Drop 37% as Debt Refinancing Deadline Approaches

Following news that the ultra-low-cost airline was considering declaring bankruptcy, Spirit Airlines‘ stock fell 37% to a record low on Friday. There are concerns about the airline’s capacity to handle impending debt maturities because it has been losing money despite high passenger demand. As of December 31, its long-term debt and financing leases consisted of about $3.06 billion, excluding current maturities. Refinancing of $1.1 billion in loyalty bonds due in 2019 is allowed to the airline until October 21.

Spirit Airlines CEO Confirms Productive Talks with Bondholders, No Immediate Bankruptcy

According to the Wall Street Journal, the airline was negotiating the terms of a possible bankruptcy filing with bondholders. However, they added that should that happen, a filing would not be happening soon. Yet, the airline cited CEO Ted Christie‘s remarks from the August second-quarter earnings call, stating that it was having productive conversations with bondholder advisors. At that point, Christie had said that talks were still going on and had declined to answer any questions about it. He had already disclosed to Spirit’s shareholders in June that the company had no intention of declaring bankruptcy. A few analysts expected Spirit to reach an agreement with its bondholders on Thursday.

We suspect Spirit should be able to renegotiate with creditors outside of bankruptcy,

Raymond James analyst Savanthi Syth

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