After months of speculation and initial assurances that Spirit Airlines (SAVE) would not file for bankruptcy after a federal judge blocked JetBlue from acquiring it (JBLU) Earlier this year, the low-cost airline finally broke the news that it was filing for Chapter 11 protection in the Southern District of New York.
With debt of more than $3.8 billion, Spirit is flying on its usual schedule while it seeks investors to help it restructure. The filing allowed it to secure immediate funding of $300 million to help with immediate operations.
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'Gross enrichment of the same people responsible for Spirit's financial collapse'
While Spirit positioned the bankruptcy as a way to “provide greater financial flexibility, position Spirit for long-term success, and accelerate investments,” one shareholder is speaking out against CEO Ted Christie and how the bankruptcy came about. bankruptcy declaration.
The biggest points of contention have to do with Christie's repeated assurances that bankruptcy was not an option in the spring and fall months, as well as the $5.3 million in retention bonuses that Spirit revealed it will pay five of its top executives revealed in the bankruptcy filings: $3 million for Christie and $850,000 for chief operating officer John Bendoraitis in particular.
“This enormous enrichment by the same people responsible for Spirit's financial collapse has come directly at the expense of the shareholders who entrusted the company with their life savings,” reads the letter to Judge Sean Lane of the Bankruptcy Court of the United States for the Southern District of New York by a shareholder whose name has been withheld.
The letter makes a series of other accusations against Spirit, including that it hired the law firm Davis Polk & Wardwell to prepare the bankruptcy proceedings, while publicly denying the possibility to clients and shareholders.
These are actions that, according to the shareholder, reflect Christie's behavior when he worked as vice president and chief financial officer of Pinnacle Airlines. After filing for bankruptcy, the airline's holding company was eventually acquired by Delta Air Lines. (give it) in 2013 and renamed Endeavor Air.
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'Once again abusing bankruptcy laws to eliminate shareholders'
“Now, at Spirit Airlines, (Christie) is once again abusing bankruptcy laws to wipe out shareholders, destroying the hard-earned savings of ordinary people,” the letter reads. It further claims that Christie's “leadership has caused devastating harm to retail investors.”
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Now that the bankruptcy court is expected to review Spirit's finances to chart a path forward for the airline, the letter asks Judge Lane to investigate what financial decisions were made in the lead-up to the current situation, as well as what was revealed in the forms filed with the court.
Other accusations concern how much of the sale of 23 Airbus (EADSF) The A320ceo and A321ceo aircraft worth $519 million had improved liquidity (Spirit disclosed $225 million, while the letter alleges the sale should have generated $519 million) and a free fee of $76 million of the JetBlue merger that, according to the letter, was not properly disclosed.
Spirit was not available to comment on the shareholder letter.
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