Spirit Airlines (ticker: SAVE) is reportedly preparing to file for bankruptcy protection following unsuccessful merger negotiations with Frontier Airlines. Sources indicate that the budget airline is in deep discussions with bondholders to finalize a bankruptcy plan that has the backing of most creditors. This comes as the company grapples with mounting losses and impending debt maturities.
The potential bankruptcy filing could occur within weeks, leading to a sharp decline of over 53% in Spirit Airlines' stock price in after-hours trading.
Last month, there were reports that Spirit Airlines was engaging in talks with Frontier Airlines regarding bankruptcy proceedings to facilitate Frontier's acquisition. To expedite the process, Spirit might attempt to sell itself under Chapter 11 bankruptcy, which would require pre-approval from creditors. This strategy aims to proceed without halting operations or draining the airline's dwindling cash reserves. Initial discussions between Spirit and Frontier included setting terms agreeable to Spirit's bondholders for approximately $2.5 billion in debt.
