Spirit Airlines
stock was falling sharply again Thursday as the ultra-low-cost carrier’s predicament worsened.
The shares have plunged this week after a federal judge blocked
Spirit’s
proposed merger with
JetBlue Airways,
siding with the Justice Department on antitrust grounds.
The Wall Street Journal reported on Thursday that Spirit was planning to explore restructuring options with advisors following the blocked deal as it faces near-term debt maturities.
In a statement to Barron’s sent after the market closed, a Spirit spokesperson said that the company “is not pursuing nor involved in a statutory restructuring.”
Spirit stock fell 7.2% on Thursday to $5.71. Shares dropped 47% on Tuesday and 22% on Wednesday.
Credit ratings agency Fitch Ratings said late Wednesday that Spirit faces “significant refinancing risk” in the next year when its $1.1 billion loyalty program debt comes due in September 2025. “Meanwhile, the company faces serious headwinds toward improving its profitability including engine availability issues, overcapacity in certain leisure markets, and intense competition,” it said.
While it didn’t change its credit rating on Spirit, sticking to B/Negative, Fitch said the airline needed a near-term plan to generate liquidity, address its refinancing risk and improve profitability to avoid a negative rating action.
Spirit also caught a downgrade from
Citi
analyst Stephen Trent on Thursday, who now rates the shares Sell. While the two carriers could still appeal the ruling, Trent said that’s unlikely. “It’s unclear why JetBlue wouldn’t cut its losses here and recognize that it avoided a risky bid on a highly levered carrier with steep losses,” he said.
Trent added that another suitor was also unlikely without Spirit first restructuring its debt—he noted net debt has jumped from $3.3 billion to $5.5 billion over the past two years. In the meantime, lower unit revenue and higher costs this year should “continue to pressure Spirit’s operations,” he added.
TD Cowen analyst Helane Becker said a Chapter 11 filing followed by a liquidation may be the best case scenario for Spirit, in a note earlier this week.
Spirit recently raised $419 million in cash from a sale-leaseback transaction involving 25 jets. Citi’s Trent said that could buy Spirit some time on its balance sheet but was “unlikely to resolve Spirit’s financial challenges.”
A Spirit spokesperson told Barron’s the company was disappointed with the outcome of the trial, but was confident in its strengths and strategy.
“Spirit has been taking, and will continue to take, prudent steps to ensure the strength of its balance sheet and ongoing operations,” the spokesperson added.
Write to Callum Keown at [email protected]
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