Frontier Airlines, Inc. has submitted a proposal to provide an alternative restructuring plan for the creditors and stockholders of Spirit Airlines, Inc. The proposal includes the combination of Spirit with Frontier, with compelling strategic rationale including a stronger competitive position, improved loyalty and frequent flyer programs, and offering more low fares to consumers.
The terms of the Frontier proposal include the issuance of $400 million principal amount of debt by Frontier and 19.0% of Frontier’s common equity at closing, to be distributed to the Holders of Senior Secured Notes, Convertible Notes, and Existing Interests. The aggregate value of the proposal consideration is no less than $2,162 million before considering any synergies from the combination of Frontier and Spirit.
Frontier's Board of Directors has unanimously approved the proposal and believes it offers more value to Holders of the Senior Secured Notes, Convertible Notes, and Existing Interests than the current proposed plan of reorganization by Spirit. The proposal also takes into account potential synergies, which could further increase the aggregate value to these stakeholders to up to $2,901 million.
The proposal is based on a valuation date of February 28, 2025, with projected 2026 EBITDAR of $1,041 million for Spirit and $1,835 million for Frontier. The combined business is projected to have a total net debt of $9,356 million at the valuation date, with an estimated total enterprise value of $18,630 million and a forecast equity value of the combined business of $9,274 million.
Frontier has engaged a management consultant firm that has indicated potential revenue synergies of $500 million or more and cost synergies of $100 million or more. Factoring in assumed synergies, the proposal could increase the equity value to the Holders of the Senior Secured Notes, Convertible Notes, and Existing Interests to up to $2,501 million in the aggregate.
Frontier has expressed its readiness to commit all necessary resources to acquire Spirit and is prepared to move quickly, including working proactively with regulators and other stakeholders. The company has retained Citigroup Global Markets, Inc. as its financial advisor and Latham & Watkins LLP as its legal counsel for the transaction.
As a result of these announcements, the company's shares have moved 5.1% on the market, and are now trading at a price of $8.18. For more information, read the company's full 8-K submission here.
