Spirit Airlines stock saw a surge of as much as 46% on Monday after the ultra low-cost carrier reached a debt extension deal with its credit card processor. Spirit Airlines was able to refinance the debt deadline by two months until December 23. Share price climbed in pre-market trading on the news.
Spirit Airlines stock was soaring after the budget airline revealed it had struck a last-minute deal to refinance some debt. The company said it had managed to push back its deadline to refinance roughly $1.1 billion in debt, according to a regulatory filing posted Friday.
Spirit Airlines debt refinance
The Spirit debt extension agreement with U.S. Bank National Association provides some elbow room to the airlines to refinance its $1.1 billion loyalty bonds due to mature next year. The previous refinancing deadline was October 21.
The Florida-based company said on Friday it had fully drawn down its $300 million revolving credit facility and expects to end this year with over $1 billion in liquidity.
Spirit Airlines borrowing
Spirit also said that it had borrowed the entirety of a $300 million revolving credit facility it had set up in March 2020. Borrowings under that facility are scheduled to mature at the end of September 2026.
Spirit Airlines losses
“Spirit has to address debt payment timing and resizing the fixed cost structure, and it is still unclear if this can be completed with/without Chapter 11,” said Savanthi Syth, analyst at Raymond James.
Spirit’s latest financial report showed its 11th consecutive quarterly loss. It revealed its struggle to make headway in a turnaround while having to increasingly compete with larger so-called “legacy” players for low-fare customers. In recent months, Spirit has deferred airplane deliveries, furloughed hundreds of pilots, and offered “voluntary unpaid leaves of absence” to flight attendants. as part of an initiative to save $100 million this year.
Spirit, which has failed to report a profit in the last five out of six quarters, unveiled plans to tap into premium travel in July to mitigate cost pressures and boost earnings. This marked a major shift away from its no-frills, ultra-low cost model.
Spirit Airlines bankruptcy
Earlier this month, Spirit Airlines stock tanked following reports that it may soon file for bankruptcy. Speculation has swirled for months that Spirit might be approaching bankruptcy. After a judge blocked its $3.8 billion merger with JetBlue Airways in January on antitrust grounds, the two companies called off their tie-up attempt two months later rather than pursue the deal through an appeal.
Spirit Airlines stock update
The news of Spirit Airlines receiving a debt-refinancing extension, sent its share price up 53% to $2.25. Share price of Spirit have fallen about 91% this year, while the S&P 500 passenger airlines index jumped 33%.
