In a recent filing with the SEC, Spirit Airlines, Inc. detailed changes to its credit card processing and revolving credit agreements, signaling a strategic move to improve liquidity and financial flexibility. The airline, based in Dania Beach, Florida, revealed the extension of its Card Processing Agreement with US Bank National Association, moving the expiration date from 12.31.2024 to 03.03.2025.
This change follows a series of extensions, the most recent of which moved the maturity of the company’s senior secured notes due 2025 from 10/21/2024 to 12/23/2024.
Amendments to the Card Processing Agreement are contingent upon the airline’s compliance with specified financial obligations, including the refinancing of its senior secured notes. The document also revealed that Spirit Airlines on Monday drew down the entire available amount of €276.92 million (€300 million) from its senior secured revolving credit facility, which matures on 09.30.2026.
However, this deadline could be brought forward if the airline fails to refinance its senior secured notes and senior convertible notes by 06.20.2025 and 02.12.2026 respectively.
Spirit Airlines has been actively engaging with holders of its senior secured notes due 2025 and convertible senior notes due 2026 regarding their maturities. The company expects to end the year with more than €922.31 million (€1 billion) of liquidity, which includes cash, cash equivalents, short-term investment securities and proceeds from ongoing additional liquidity initiatives.
In other recent news, Spirit Airlines is facing significant financial challenges. The company is in talks with bondholders over potential bankruptcy terms as it faces a critical deadline to refinance €1.01 billion (€1.1 billion) of loyalty program bonds due next year. Susquehanna revised its financial forecast for the airline, lowering its price target and maintaining a Negative rating on the company’s stock.
Despite a slight improvement in forecasts for the second half of 2024, the overall outlook remains cautious, particularly for fiscal 2025. The company reduced its adjusted earnings per share (EPS) estimate for fiscal 2025 based on expectations of a weaker operating and profit margin.
At the same time, Spirit Airlines has been dealing with the fallout of a €3.50 billion (€3.8 billion) merger deal with JetBlue Airways. In response to these challenges, the company has implemented cost-cutting measures and sought to attract premium travellers.
TD Cowen maintained a Sell rating on Spirit Airlines shares, underlining the importance of the company’s upcoming financial moves, particularly regarding its loyalty program bonds due in 2025.
InvestingPro Insights
Spirit Airlines’ recent financial moves, as detailed in the SEC filing, align with several key insights from InvestingPro. The company’s efforts to improve liquidity and extend credit arrangements are especially crucial given its current financial position.
InvestingPro data reveals that Spirit Airlines is operating with a significant debt burden, which explains the company’s focus on refinancing and extending credit agreements. The airline’s market capitalization stands at a modest €147.79 million (€160.44 million), reflecting the challenges it is facing.
Two relevant InvestingPro Tips highlight the company’s financial difficulties:
1. Spirit Airlines may struggle to make interest payments on its debt, underscoring the importance of recent credit agreement extensions.
2. The company is rapidly burning through cash, which aligns with its decision to draw down the full amount of €276.92 million (€300 million) from its revolving credit facility.
These insights provide context to Spirit’s strategic moves to secure over €922.31 million (€1 billion) of liquidity by the end of the year. The company’s price-to-book ratio of 0.2 suggests the stock may be undervalued, but this should be weighed against its financial challenges.
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