Originally Posted by
CatPilot1
The termination of the GA Telesis deal is bad news for Spirit’s bondholders, because it wipes out a $520 million liquidity lifeline they were counting on to strengthen Spirit’s position in bankruptcy. With less cash, creditors lose flexibility and bargaining power.
But if you’re not worried about bondholder recoveries — and your priority is just seeing Spirit sold, or forcing them to accept whatever lowball bid Frontier (Frankie) puts on the table — then it actually helps. Spirit has fewer options to resist and may be compelled to take the deal.
The problem is those bond holders now have secured debt. So the $2.1B total they are owed now needs to get paid from sales of other assets. This gets paid before wages. So that $512M would have gone a long way to cover them.
Frontier isn't going to take over Spirit's liabilities. The BK administrator doesn't just "wipe out debt" so some other airline can get a sweet deal. Spirit "taking the deal" doesn't include just super diluting its financial responsibilities. The people that loaned money will all get paid.
This isn't waying Frontier won't take on all that debt, but why would they do it? Trying to carry that $1B a year operating loss going forward would crush them.