Spirit on Friday unlocked a new funding source as it works to maintain normal operations during its second bankruptcy period in less than a year’s time.
The ultra-low-cost airline said it received approval from the U.S. Bankruptcy Court for the Southern District of New York for a multi-tranche debtor-in-possession financing facility of up to $475 million from its existing bondholders. Of that total, $200 million will be available immediately.
The financing arrangement was first announced in September, but Spirit needed a final ruling from the court.
Spirit has been dangerously short of liquid capital for months. The carrier reported net losses in the two quarters since its emergence from its first bankruptcy and has struggled with weak demand for domestic leisure travel.
The bankruptcy court also signed off on a deal between Spirit and aviation leasing company AerCap that will speed up the airline’s fleet modernization program and clear the way for the eventual delivery of 30 aircraft.
AerCap helped trigger Spirit’s second bankruptcy by claiming defaults on 37 aircraft in Spirit’s fleet, but as part of the new agreement, AerCap will pay Spirit $150 million, and Spirit will reject leases on 27 aircraft, freeing itself from the financial commitment.
The deal settles all disputes between the two companies.
“We are pleased to have reached another significant milestone in our restructuring, which represents continued progress toward securing a successful future for Spirit,” Spirit President and CEO Dave Davis said in a statement. “With these approvals in place, we are better equipped to build a stronger airline that delivers unmatched value to American consumers. We thank our stakeholders for their support and the Spirit team for their dedication and resilience during this process.”
Spirit filed for Chapter 11 bankruptcy protection in August after warning investors that it might not survive the year as a going concern. It has furloughed hundreds of pilots and canceled routes, and is now working with the bankruptcy court to end aircraft leases that contributed to its high debt load.
