Spirit Airlines faced a challenging day in the market on Wednesday, with its stock closing at an all-time low of $5.21. The decline in share price was triggered by multiple factors, including the cancellation of its proposed $3.8 billion merger with JetBlue Airways and reports suggesting that creditors are bracing for potential bankruptcy.
A Bloomberg report, citing unnamed sources, indicated that creditors holding Spirit’s debt maturing in the coming years are exploring strategies to protect their interests in the event of a bankruptcy filing. This news added to investor concerns about the airline’s financial health, particularly given its substantial debt obligations totaling over $1 billion.
Market skepticism regarding the true value of Spirit’s debt was evident, with some of its notes trading below par value. For example, notes due in 2026 were trading at 74 cents on the dollar, while those due in 2025 were priced at 76 cents on the dollar.
The situation worsened for Spirit following a federal judge’s decision to grant the U.S. Justice Department’s request to block the merger with JetBlue. Fitch Ratings responded by downgrading Spirit’s credit rating, citing significant challenges to the airline’s profitability.
Despite Spirit’s reassurances about addressing its debt issues and strengthening its balance sheet, including hiring financial advisers to explore refinancing options, concerns persist about its ability to weather the financial storm. Some analysts even speculate that the airline may be headed towards liquidation if it fails to improve its financial performance.
As Spirit Airlines continues to grapple with its financial challenges, investors remain cautious about its prospects, with uncertainties looming over its ability to navigate the turbulent waters of the aviation industry.