It didn’t take much, just a quarter and a nickel off the share price, but Spirit Airlines stock closed at $5.21 Wednesday, the lowest point ever. Not only were investors glum about the carrier calling off its $3.8 billion merger with JetBlue Airways, they’re also digesting a Bloomberg report that Spirit creditors are preparing for the worst.
The outlet, citing unnamed sources, reports that owners of some of the company’s debt coming due next year and the year after that are trying to figure out how they might preserve their spot in line in case of a bankruptcy.
Spirit has more than $1 billion debt that it has to repay, and soon, but some of that debt is trading for less than par value on public markets, suggesting some market doubt about whether the notes are worth what the company says they are. One issuance, due 2026, is trading at 74 cents on the dollar. Another set of notes, due in 2025, are going for 76 cents on the dollar.
When a federal judge granted the U.S. Justice Department’s request to block the JetBlue merger, Fitch Ratings downgraded Spirit’s credit rating, noting that the airline “faces serious headwinds toward improving its profitability.” The company has been struggling to find its way back into the black, and there are some analysts who believe that it may be heading towards outright liquidation.
Spirit has made a lot of reassuring noises about its debt problem, including in its JetBlue bad news press release that it “has been taking, and will continue to take, prudent steps to ensure the strength of its balance sheet and ongoing operations, including assessing options to refinance upcoming debt maturities.” That includes hiring financial advisers to help it buy more time, but it remains to be seen whether it will be able to do so.