Spirit Airlines Nears Bankruptcy, Creditors May Approve Equity 'Cancellation:' Here's What It Means For Investors As Shares Fall With A Thud

Zinger Key Points
  • Spirit Airlines delays September quarter earnings announcement.
  • Company in talks with majority debtholders, may cancel equity shares.

Shares of Spirit Airlines Inc. SAVE plunged by 62.73% in after-hours and closed nearly 5.29% lower at $3.22 apiece on Tuesday after the company failed to file its earnings for the quarter ended September 2024. The discount airline in a filing late Tuesday, said that it is in talks with its creditors to carve out a restructuring plan which could "lead to the cancellation of the Company's existing equity."

What Happened: The budget airline is in discussion with its noteholders for potential bankruptcy or out-of-court restructuring that has been underway for months. This comes after Spirit’s effort to merge with Frontier Group Holdings Inc. ULCC and its takeover by JetBlue Airways Corporation JBLU fell out.

Also read: Top Wall Street Forecasters Revamp Tower Semiconductor Price Expectations Ahead Of Q3 Earnings

Why It Matters: As the ultra-discount airline’s efforts to save itself fail, its equity holders may suffer because of the cancellation of shares. However, the company’s statement indicates that the plan that it is trying to negotiate would not hamper general unsecured creditors, employees, customers, vendors, suppliers, aircraft lessors, or the holders of its secured debt backed by aircraft.

The bondholders include the owners of about $1 billion, 8% coupon loyalty bonds which are due 2025 and $500 million in unsecured convertible bonds due 2026. This former debt is backed by claims on elements of the company's frequent-flyer program.

Also Read: Top 3 Tech And Telecom Stocks Which Could Rescue Your Portfolio In Q4

Price Action: The shares of Spirit Airlines have underperformed the NYSE Composite on a year-to-date basis as it has fallen by 80.31%, whereas the index gave a 17.88% return in the same period. The relative strength index at 40.79 shows that the stock is neither overbought nor oversold.

The consensus estimates of all the 12 analysts tracking the stock as per Nasdaq, is a “sell” with an average price target is $2.13 apiece.

Photo via Wikimedia Commons

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: EarningsEquitiesNewsAfter-Hours CenterMarketsGeneralFrontier Group Holdings Inc.JetBlue Airways CorporationNASDAQ: JBLUNASDAQ: ULCCNYSE: SAVESpirit Airlines
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!