It seems the stars were again not aligned to let Frontier Airlines acquire Spirit Airlines. According to the latest statement released by Spirit, Frontier Airlines recently made another proposal to merge, but the new terms and conditions did not receive a nod from the stakeholders. Spirit said that it would continue to proceed with standalone recapitalization.
Another proposal made
In a statement released by Spirit Airlines
, the airline said that Frontier Airlines
made a fresh proposal for an alternative restructuring plan. Calling it the ‘New Proposal,’ Spirit said that it offered the carrier’s stakeholders to receive a $400 million principal amount of second-lien debt issued by Frontier and 19.0% of Frontier’s common equity following the proposed combination.
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It added that the New Proposal did not require Spirit to complete its previously announced $350 million equity rights offering. It did, however, ask for a waiver of the Bankruptcy Court-approved $35 million termination fee that would otherwise be owed under the Backstop Commitment Agreement, dated November 18, 2024.
Spirit also made the following observation regarding Frontier’s New Proposal:
“Notably, the New Proposal did not address certain material risks and issues previously identified by the Company, including that the New Proposal would deliver less in value to the Company’s stakeholders than contemplated by the Company’s existing plan of reorganization, is uncertain as to timing and completion, would result in extended and materially more costly and uncertain chapter 11 proceedings, and has uncertainties with regard to needed regulatory and court approvals.”
Counterproposal and rejection
Spirit took some time to review the proposal, adding that its management and Board of Directors reviewed it carefully in consultation with the Company’s external legal and financial advisors.
The airline then submitted a counterproposal to Frontier on February 7, calling it the ‘Spirit Counterproposal.’ The airline proposed its shareholders get $600 million in debt and $1.185 billion in equity.
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Spirit’s argument was that Frontier’s new proposal was not as beneficial to its shareholders compared to its reorganization plan. The airline’s counterproposal was rejected by Frontier, leaving Spirit to chart its path alone. The carrier added,
“Spirit will continue swiftly to advance and conclude its restructuring process, which will significantly deleverage the Company and position it for long-term success. The hearing to consider confirmation of Spirit’s plan of reorganization is currently scheduled for Feb. 13, 2025 at 10am EST. Approximately 99.99% of all voting creditors have voted to accept the plan, and all but two objections have already been resolved. The Company expects to complete the restructuring in the first quarter of 2025.”
Not the first time
This was another attempt by Frontier to acquire Spirit Airlines. Reports of the two airlines reviving talks of a merger surfaced last month, and Spirit said that while it rejected Frontier’s “inadequate and unactionable” acquisition offer, it was open to considering another proposal that addressed its concerns.
Photo: Bradley Caslin | Shutterstock
In October last year, The Wall Street Journal reported that the two budget carriers were in early discussions about a potential merger but added that the talks were in their infancy.
Frontier and Spirit had first entered talks about a merger in 2022. Things got interesting when JetBlue also made its intention of acquiring Spirit clear and began a bidding war of sorts. Things eventually went in favor of JetBlue, but the deal was met with resistance from authorities who questioned its impact on competition within the US aviation sector.
JetBlue
officially ended its merger process
with Spirit early last year after the Department of Justice (DOJ) won the case against the merger in January 2024. This was also a big blow to Spirit, which has been dealing with financial troubles and was hoping for the merger to come through.
Photo: Kevin Porter | Shutterstock
In the last few months, the ultra-low-cost carrier has been in the news for its Chapter 11 bankruptcy filing and its attempt to restructure its finances. It remains to be seen how it manages to restructure its business in the coming months.
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