Spirit Airlines announced it has filed for Chapter 11 bankruptcy in an effort to reorganize its debt and continue operations.

Spirit is one of the leading budget budget airlines, but has faced a number of challenges, from massive travel slump during the pandemic to a failed merger with Jet Blue. As a result, the company has worked out an agreement with its debtors to reorganize under Chapter 11.

Spirit Airlines, Inc. today announced that it has entered into a restructuring support agreement (the “RSA”) supported by a supermajority of Spirit’s loyalty and convertible bondholders on the terms of a comprehensive balance sheet restructuring. The restructuring is expected to reduce Spirit’s debt, provide increased financial flexibility, position Spirit for long-term success and accelerate investments providing Guests with enhanced travel experiences and greater value. 

In connection with the RSA, Spirit has received backstopped commitments for a $350 million equity investment from existing bondholders and will complete a deleveraging transaction to equitize $795 million of funded debt. To implement the RSA, the Company has commenced a prearranged chapter 11 process in the United States Bankruptcy Court for the Southern District of New York (the “Court”). Existing bondholders are also providing $300 million in debtor-in-possession (“DIP”) financing, which, together with Spirit’s available cash reserves and cash provided by operations, is expected to further support the Company through the chapter 11 process.

The company assures customers and employees that day-to-day operations will remain unaffected, with customers still able “to book and fly without interruption.” Spirit says the bankruptcy “will not impact Team Member wages or benefits,” and that “vendors aircraft lessors and holders of secure aircraft indebtedness will continue to be paid in the ordinary course.”

“I am pleased we have reached an agreement with a supermajority of both our loyalty and convertible bondholders on a comprehensive recapitalization of the Company, which is a strong vote of confidence in Spirit and our long-term plan,” said Ted Christie, Spirit’s President and Chief Executive Officer. “This set of transactions will materially strengthen our balance sheet and position Spirit for the future while we continue executing on our strategic initiatives to transform our Guest experience, providing new enhanced travel options, greater value and increased flexibility. I’m extremely proud of the Spirit team’s hard work and dedication, which is key to our sustained progress in advancing our business and delivering for our Guests.” 

The company says it expected to be delisted from the New York Stock Exchange, but that “common stock will continue to trade in the over-the-counter marketplace” during the bankruptcy process.