After months of speculation and initial reassurances that Spirit Airlines (SAVE) would not file for bankruptcy after a federal judge blocked it from getting acquired by JetBlue (JBLU) at the start of the year, the low-cost carrier finally dropped the news that it is asking for Chapter 11 protection in the Southern District of New York.
More than $3.8 billion in debt, Spirit is running flights on its usual schedule as it looks for investors who will help it restructure. The filing allowed it to secure an immediate $300 million in financing to help with immediate operations.
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'Gross enrichment of the very people responsible for Spirit's financial collapse'
While Spirit positioned the bankruptcy as a way to “provide increased financial flexibility, position Spirit for long-term success and accelerate investments", one shareholder is vocally speaking out against chief executive Ted Christie and how the bankruptcy filing went down.
The biggest points of contention involve Christie's repeated reassurances that bankruptcy was not an option in the spring and fall months as well as the $5.3 million in retention bonuses that Spirit disclosed it will pay five of its top executives disclosed in the bankruptcy filings — $3 million for Christie and $850,000 for Chief Operating Officer John Bendoraitis in particular.
"This gross enrichment of the very people responsible for Spirit’s financial collapse has come directly at the expense of shareholders who trusted the company with their life savings," reads the letter addressed to Judge Sean Lane of the United States Bankruptcy Court for the Southern District of New York by a shareholder whose name has been kept private.
The letter makes a number of other allegations against Spirit, including that it retained law firm Davis Polk & Wardwell to prepare for bankruptcy proceedings while publicly denying the possibility to customers and shareholders.
These are actions that, the shareholder claims, mirror Christie's behavior when working as a vice president and CFO at Pinnacle Airlines. After filing for bankruptcy, the airline holding company was eventually acquired by Delta Air Lines (DAL) in 2013 and rebranded as Endeavor Air.
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'Once again abusing bankruptcy laws to eliminate equity holders'
"Now, at Spirit Airlines, [Christie] is once again abusing bankruptcy laws to eliminate equity holders, destroying the hard-earned life 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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With bankruptcy court now expected to go through Spirit's finances to chart a way forward for the airline, the letter calls on Judge Lane to look into which financial decisions were taken in the lead-up to the current situation as well as what was disclosed in the forms filed to the court.
Further accusations concern how much of the sale of 23 Airbus (EADSF) A320ceo and A321ceo planes for a reported $519 million had improved liquidity (Spirit disclosed $225 million while the letter alleges the sale should have generated $519 million) and a $76 million break-free fee from the JetBlue merger that the letter claims was not properly disclosed.
Spirit was not available to comment on the shareholder's letter.
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