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Spirit Airlines has won the backing of two of its three major creditor groupings needed to secure a $500mn bailout from US President Donald Trump’s administration, according to two people close to the negotiations.
Holders of a $275mn senior revolving credit facility administered by Citigroup, as well as a separate committee of unsecured creditors that holds billions of dollars of junior claims, are willing to sign off on Trump’s offer to pump in the $500mn needed for Spirit to exit bankruptcy, the people said.
The unsecured creditor group was set to be wiped out in the previous Spirit reorganisation plan and is still expected to receive nothing if the Trump investment goes ahead.
Liquidating the airline would result in potential losses of $4bn for unsecured lenders. However, Trump’s bailout plan would avoid those costs and save 17,000 jobs — a result that the unsecured creditors believed was a worthy goal, according to one person involved in the process.
“We’re thinking about doing it, helping them out, meaning bailing them out, or buying it, I think we’d just buy it,” Trump said last Thursday.
The investment from Trump would be a first-in-priority loan that paid interest and have warrants representing 90 per cent of the reorganised Spirit’s shares attached.
The roadblock to clinching a deal remains Spirit bondholders, who account for debt worth almost $900mn in face value and have been divided over the offer. A bailout could give bondholders new debt in the reorganised Spirit as well as the remaining 10 per cent of the airline’s shares.
The top two holders of Spirit senior secured notes are Ken Griffin’s Citadel Americas and Cyrus Capital. Other holders include Ares, Pimco and Arena Capital.
Airline analysts had been sceptical that Spirit would be viable as a standalone carrier, even if jet fuel prices fell back to the levels seen prior to the Iran war. The airline lost tens of millions of dollars in the first two months of this year.
One person familiar with restructuring negotiations said the Trump infusion would “unlock” hundreds of millions of dollars in existing Spirit restricted cash. A reorganised and streamlined carrier could then be involved in US airline consolidation.
If all the Spirit creditor groups agree on the Trump administration’s deal, a New York federal bankruptcy court hearing could be held on Thursday.
“Everyone will know who killed this company,” said the person involved in the negotiations, referring to the pressure all sides were bearing in deciding on the Trump plan.
Spirit Airlines declined to comment.
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