Spirit Airlines bonds tumble again as next-step speculation swirls

Bonds backing Spirit Airlines Inc. (NYSE: SAVE) took another tumble today as the fallout from a federal judge ruling, which blocked its proposed acquisition by JetBlue Airways Corporation’s (Nasdaq: JBLU), deepened.

Spirit and JetBlue have said they are “evaluating” next steps and have not ruled out an appeal.

Market sources said Spirit’s 8% senior secured notes due 2025, which are secured by the airline’s loyalty program and become current this September, plunged to a new all-time low of 49 today, down roughly three points from yesterday, but noted that as the afternoon wore on, the bonds were being quoted 46-48. On Tuesday, the 8% notes’ low tick was 54 in reaction to the judge’s ruling and the paper later rallied to a context of 60-61.

Fitch Ratings on Jan. 17 said it believes an appeal is “unlikely,” meaning Spirit must now address its maturities and operational turnaround on its own. The agency said the airline faces “significant refinancing risk in the next year” as its $1.1 billion loyalty program debt comes due in September 2025.

Fitch added that it expects Spirit to focus on bolstering its liquidity, explaining the company could undertake more sale-leasebacks, EETC (enhanced equipment trust certificate) offerings and pursue other sources. The company generated around $419 million via sale-leasebacks for 25 aircraft earlier this month.

The Wall Street Journal reported today that Spirit is “exploring restructuring options” after the scuttling of the merger with JetBlue.

Moody’s on Nov. 20 downgraded Spirit by two notches, to Caa1, from B2, retaining a negative outlook, on weakening credit metrics. The company’s 8% notes at that time were downgraded to B2, from Ba3.

Featured image by Gece33/Getty Images

This article originally appeared on PitchBook News