(Bloomberg) — Spirit Airlines Inc. is nearing a deal with creditors that would restructure its crushing debt burden in bankruptcy court after talks about a tie-up with rival Frontier Group Holdings Inc. failed.
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In a filing late Tuesday, Spirit said it is in advanced discussions with a large majority of its bondholders to effect a restructuring. That would be carried out in a Chapter 11 bankruptcy proceeding, according to people with knowledge of the matter, who asked not to be identified discussing private conversations.
An agreement with creditors is “expected to result in the cancellation of the company’s existing equity,” Spirit said in the filing.
Representatives for Spirit and Frontier declined to comment. Spirit Airlines was in talks with Frontier about filing for bankruptcy as a way to facilitate a takeover by the rival discount carrier, Bloomberg previously reported. The Wall Street Journal reported Tuesday that Spirit’s merger talks with Frontier had collapsed.
The ultra-discount airline has struggled to find a way forward after its proposed takeover by Jetblue Airways was blocked on antitrust grounds earlier this year. Negotiations with bondholders on the terms of a possible bankruptcy or out-of-court restructuring have been going on for months.
Spirit’s creditors include holders of approximately $1 billion in so-called loyalty bonds – 8% notes due 2025 that are backed by claims on elements of the company’s frequent flyer program – and $500 million in unsecured convertible notes due 2026 .
Spirit said in its statement that it was unable to report its quarterly results for the period ending September 30 due to pressure from restructuring negotiations.
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