Spirit Air bondholders plot strategy as carrier sputters

Spirit Airlines bondholders, growing increasingly worried about the company’s ability to manage its more than $3b of borrowings, are mapping out a strategy that they think may insulate them from devastating losses in the event the air carrier can’t repay its obligations. The plan, dubbed a “triple-dip” by some of the creditors, would aim to capitalize on a series of moves the airline made during a 2020 bond sale. Certain company units sold notes backed by Spirit’s loyalty program and intellectual property, and sent proceeds of the deal to the airline’s parent company, which also guaranteed the debt. The mechanics of the deal resemble a structure known as the “double-dip” that has helped struggling companies raise fresh financing in exchange for giving lenders two claims on the company’s assets, said the people who asked not to be identified because talks were private. A representative for Spirit declined to comment. Representatives for bondholder advisers Evercore Inc. and Akin Gump Strauss Hauer & Feld didn’t respond to requests for comment. In Spirit’s case, the bondholders believe they have three claims — to Spirit’s guarantee, the intercompany loan and the loyalty program and related assets, the people said. A “triple-dip” hasn’t yet been tested in court, but “double-dip” creditors have ended up with improved recoveries in past bankruptcies. When American Airlines’ then-parent company AMR Corp. filed for bankruptcy, double-dip creditors who had claims tied to both American and the parent received full payouts when AMR emerged from court protection in 2013. The bondholders are examining options that would further boost their claims on the collateral, some of the people said. <br/>