In Good Spirits; Spirit Airlines (OTC: SAVEQ) continues with restructuring plans and Turn Away from Frontier Proposal
First reported by MSNBC, Frontier said in a release that it has met with Spirit’s board and executives since it made its proposal this month. Frontier executives said in an email to counterparts at Spirit this week that their plan is better than Spirit’s own plan to emerge from bankruptcy.
“We continue to believe that under the current standalone plan, Spirit will emerge highly levered, losing money at the operating level, and this would not be a transaction we would pursue,” wrote Frontier Chairman Bill Franke and CEO Barry Biffle in a Tuesday email to Spirit Chairman Mac Gardner and CEO Ted Christie. “As a result, time is of the essence.”
However, Spirit Airlines (OTC: SAVEQ) has chosen to reject a proposal from Frontier Airlines, deciding that the offer would not provide as much value to its stakeholders as its current restructuring plan, according to a recent filing.
The proposal was submitted by Frontier to Spirit Airlines’ debtors on January 7 and, if accepted, would have led to a merger between the debtors and Frontier.
The proposal was deemed as uncertain in terms of timing and completion and was not actionable. It would have required the NDA Parties to invest $350 million in equity, a condition they were not willing to agree to base on the terms.
In addition, the proposal would have necessitated the company to pay a $35 million backstop fee under a court-approved equity rights offering backstop agreement.
Under the terms of the proposal, Spirit’s stakeholders would have received a $400 million principal amount of debt issued by Frontier and 19.0% of Frontier’s common equity after the merger. The agreement also required consenting stakeholders to complete the company’s previously announced equity rights offering of equity securities, totaling $350 million.
The proceeds from this offering would be used to retire its debtor-in-possession facility, with any surplus proceeds being added to the combined company’s balance sheet.
Despite rejecting the proposal, Spirit Airlines has not delayed its planned emergence from Chapter 11. The company continues to progress through its restructuring process.