The shares of Spirit Airlines (SAVE) fell as much as 64% on Wednesday morning, 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 The Wall Street Journal report he said the airline is preparing to file for bankruptcy protection within weeks as its tie-up talks with Frontier broke down.
This report follows a separate statement from the company late tuesdaywhich said it has been in “constructive discussions” to finalize a restructuring agreement with holders of its senior secured notes due 2025.
If an agreement with creditors is executed, “it is expected to lead to the cancellation of the existing equity of the company,” Spirit said. If an agreement with the noteholders is not reached, the carrier said it will consider all alternatives.
The stock of the spirit has fallen more than 90% this year.
Spirit also said Tuesday that it would not be able to present its quarterly results for the period ending Sept. 30, as restructuring negotiations have also diverted significant management time and internal resources from completing its financial reports.
The carrier has struggled to get out of a mountain of debt as merger talks with other airlines failed to materialize.
Last month, Spirit and Frontier reported fusion revived speak Initial talks of a 2022 tie-up between the two airlines ended after JetBlue (JBL) surpasses Frontier. However, the JetBlue merger it was blocked in January by a federal judge over antitrust concerns.
Wall Street has become increasingly bearish on the airline, with analysts maintaining zero 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 “will shrink significantly in a restructuring.”
“[Tuesday’s] the news also creates the risk of customers booking off the airline resulting in even greater pressure on liquidity,” wrote Tom Fitzgerald, an analyst at TD Cowen.
“In the event of a restructuring, the focus will shift to the fate of Spirit’s fleet,” Fitzgerald added. “We expect the airline to sell the remaining encumbered assets to pay the debt assumed on the aircraft and work to reject the lease on the rest of the fleet.”
Last month, Spirit said 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 to @ines_ferre.