Spirit Airlines stock (SAVE) fell as much as 64% early Wednesday, the most on record, as the budget airline explores a deal with creditors to restructure its debt amid a reported threat of bankruptcy following merger talks with Frontier (ULCC) collapsed.
On Tuesday, a Wall Street Journal report said the airline is preparing to file for bankruptcy protection within weeks as it broke off talks with Frontier.
This report followed a separate statement from the company late Tuesdaywhich said it was in “constructive discussions” to iron out a restructuring agreement with holders of its senior secured notes due 2025.
If an agreement with creditors is executed, “it is expected to result in the cancellation of the company’s existing equity,” Spirit said. If an agreement with noteholders is not reached, the carrier said it will consider all alternatives.
Spirits stocks have fallen more than 90% this year.
Spirit also said Tuesday it would not be able to file its quarterly results for the period to Sept. 30 as restructuring negotiations also diverted significant management time and internal resources from completing its financial statements.
The airline struggled to get out of a mountain of debt as merger talks with other airlines failed to materialize.
Last month, Spirit and Frontier reported merger revived talks Initial talks between the two airlines in 2022 ended after JetBlue (JBLU) exceeds Limit. The JetBlue merger was blocked in January by a federal judge on antitrust issues.
Wall Street has turned increasingly bearish on the airline, with analysts maintaining no Buy ratings, four Hold recommendations and eight Sell recommendations on the stock, according to Bloomberg data.
In a client note late Tuesday, TD Cowen analysts lowered their full-year estimates on the assumption that the airline “shrinks significantly in a restructuring.”
“[Tuesday’s] news also creates the risk of customers booking away from the airline, leading to even greater pressure on liquidity,” TD Cowen analyst Tom Fitzgerald wrote.
“In the event of a restructuring, focus will then shift to the fate of Spirit’s fleet,” Fitzgerald added. “We expect the airline to sell the remaining encumbered assets to pay down the associated debt on the aircraft and work to reject leases on the rest of the fleet.”
Spirit said last month it would lay off more than 300 pilots in January and sell older planes to cut costs.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X @ines_ferre.