Is
Spirit Airlines on the brink of insolvency?
Some
seem to think so after the stock
price fell to a record low this week, especially creditors.
Spirit Airlines stock closed at $5.21 Wednesday, the lowest
share price ever for the airline. Many analysts predicted that the carrier might go bankrupt after facing so much debt after a federal judge blocked its merger with Jetblue Airways in January.
Creditors Lining Up
Now creditors are reportedly practically falling over
themselves, lining up to be paid. There is a fear that the airline might go
bankrupt.
Spirit is more than $1 billion in debt. Some of the notes with
creditors are trading for about $0.75 on the dollar. In fact, Fitch Ratings
downgraded Spirit’s credit rating.
Fitch wrote that the carrier “faces serious headwinds toward
improving its profitability,” while other airline analysts believe the
company is headed toward insolvency or an outright liquidation of assets. In
many respects, this is why Spirit was counting on the merger.
However, a federal judge sided with the Department of Justice and ruled that a merger would create a monopoly and increase prices. Spirit said 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.”
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