Spirit Airlines shares tank on WSJ report of shutdown after Trump bailout collapses
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The news: Spirit Airlines shares plunged as much as 74% on Friday in New York after the Wall Street Journal reported the bankrupt discount carrier is preparing to cease operations, its USD500 million ($693 million) government rescue deal having fallen apart.
The context: Spirit had been in talks with the Trump administration on a deal that would have provided a cash infusion in exchange for warrants convertible into a stake of up to 90% of the company.
But disagreements inside the administration over whether and how to fund the bailout, combined with resistance from some bondholders, killed the deal, according to unnamed sources who spoke to the Journal. Surging fuel costs, linked to the ongoing conflict in the Middle East, compounded the pressure.
Spirit, which has spent much of the past 18 months in chapter 11, had planned to exit bankruptcy by summer. With its liquidity worsening and the bailout off the table, the airline is now moving to liquidate its aircraft fleet and shut down, according to the report.
What they said: A company spokesperson told Bloomberg the airline was operating as usual and declined to comment on ongoing discussions.
The numbers: Shares touched USD0.39 before recovering slightly to USD0.48 at 11:38am New York time. Shares in rivals JetBlue and Frontier traded higher.
The sources: The Wall Street Journal, Bloomberg
