Trump Administration Pursues $500 Million Bailout for Spirit Airlines

President Donald Trump announced that his administration is evaluating a $500 million federal rescue for Spirit Airlines, a low-cost carrier strained by higher fuel costs. The plan could involve a loan that later converts to a longer-term loan with warrants that might give the government up to a 90% equity stake. Reuters reported that two of Spirit’s three creditor groups have signaled support, while Bloomberg said a coalition of lenders, including Citadel, is pushing back on the terms. A New York bankruptcy court could hear a deal on Thursday if all creditor groups agree.

Reuters

• Proposed financing: $500 million.

Reuters

• Existing credit facility: $275 million.

Reuters

• Potential government stake: up to 90% of Spirit.

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• Senior secured note holders: Citadel Americas (Ken Griffin), Cyrus Capital; unsecured creditors include Ares, Pimco, Arena Capital.

Reuters

The White House called criticism “premature” and said no concrete plan has been released. Trump asserted the government would sell any stake for a profit when oil prices fall. Senate Majority Leader John Thune and Senate Commerce Chair Ted Cruz publicly opposed the idea, warning against government ownership of airlines.

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Republican leaders labeled the proposal “a really bad idea” and “a terrible idea; corporate bailouts are a mistake.” Sen. Thom Tillis called the talks “horsesh*t,” and Sen. Josh Hawley said he “doesn’t really want to help Spirit.” Policy analysts Marc Scribner (Reason Foundation) and Deborah Lucas (MIT Sloan) argued the bailout would shift risk to taxpayers and undermine competition in the ultra-low-cost carrier market.

Would a government bailout of Spirit Airlines really be worth it?

Sources disagree on creditor consensus: Reuters notes two of three groups backing the deal, while Bloomberg reports a lender coalition resisting the terms and awaiting a response to its counterproposal. The White House’s position varies between describing discussions as premature and indicating active consideration of a purchase.

Reuters

• “This would be a really bad idea. I don’t think you want the government owning airlines,” — John Thune, Senate Majority Leader

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• “It is a terrible idea; corporate bailouts are a mistake,” — Ted Cruz, Senate Commerce Chair

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• “I don’t really want to help Spirit,” — Josh Hawley, U.S. Senator

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• “When the price of oil goes down, we would sell it ?for a profit,” — Donald Trump, President

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• “What is the benefit of perpetuating a financial zombie like Spirit Airlines?” — Marc Scribner, Reason Foundation

Benzinga

If creditor groups reach unanimity, a bankruptcy-court hearing is slated for Thursday. The administration’s next steps will depend on whether a formal financing agreement is finalized or if further negotiations with dissenting lenders reshape the proposal.

Reuters