Spirit Airlines, weighed down by debt, is unlikely to find new suitors

By Claudia Assis

Budget carrier's debt has gone up to $5.5 billion

A new bid for Spirit Airlines Inc. is unlikely to materialize, as the struggling ultralow-cost airline is saddled with debt.

Spirit's (SAVE) net debt has ballooned to $5.5 billion from $3.3 billion in the past two years. The company is also staring down more than $1 billion in debt coming due next year.

A federal judge on Tuesday blocked JetBlue Airways Corp.'s (JBLU) $3.8 billion bid for Spirit, siding with the Justice Department's claim that the proposed merge would hurt competition.

Although "it would be hard to rule out entirely the appearance of other Spirit Airlines suitors, a new bid seems unlikely [without] the carrier first restructuring its debt," Citi analyst Stephen Trent said in a note late Wednesday.

And Spirit appears to be doing just that. The airline is planning to discuss its path forward with advisers, the Wall Street Journal reported Thursday, citing people familiar with the matter.

On Wednesday, Fitch Ratings said that Spirit faces "significant refinancing risk" in the next year, with $1.1 billion in loyalty-program debt coming due in September 2025, and "serious headwinds" in its quest to improve its balance sheet, including overcapacity in some of its leisure-travel markets and stiffer competition.

Spirit's earnings before interest, taxes, depreciation and amortization is unlikely to turn positive until 2025, Trent said. The analyst downgraded his rating on Spirit to sell from the equivalent of hold.

Shares of Spirit have lost 79% in the past 12 months, contrasting with gains of about 21% for the S&P 500 SPX in the same period.

Also read: JetBlue dodged a bullet after judge blocked Spirit acquisition, J.P. Morgan says

-Claudia Assis

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01-18-24 1342ET

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