Spirit Airlines stock soars 53% on debt refinancing extension

Key points

• Spirit Airlines stock jumped 53% on Monday.

• The catalyst was an extension the company got to refinance its debt.

• While the stock is cheap, it's not a good value.

Even with the huge gain, this penny stock is still down 86% YTD.

Spirit Airlines (NYSE:SAVE) has endured its share of turbulence this year, but the stock was flying high Monday.

The low-cost carrier’s stock price soared 53% on Monday, after rising as much as 60% on the day. It remains in penny stock territory, trading at $2.25 per share.

It has been a brutal year for Spirit Airlines stock, as, even with today’s gains, it remains down 86% year-to-date.

What caused the stock to elevate?

Debt refinancing extension

It has been a horrible year for Spirit and its shareholders, beginning with the news back in January that its deal to merge with JetBlue Airways (NASDAQ: JBLU) was struck down by regulators as it would take a low cost carrier off the market.

The stock tanked from about $16 per share at the start of the year down to below $5 per share. And as the year went on, the stock dropped further as it was left saddled with billions in debt, all the while reporting consistent net losses and little cash flow.

Earlier this month, it was reported by several news outlets that Spirit was considering filing for bankruptcy as debt refinancing negotiations it had been having with its bondholders and creditors had stalled.

However, the catalyst for Monday’s rally was news that Spirit had received an extension from its bondholder, U.S. Bank National Association. So now, Spirit has until December 23 to reach a deal to refinance $1.0 billion in loyalty bonds it has coming due next year.

“On September 9, 2024, the company entered into a letter agreement which modified the existing Card Processing Agreement to extend the 2025 Notes Extension Deadline from September 20, 2024, to October 21, 2024,” the company wrote in a recent SEC filing. “On October 11, 2024, the company entered into a letter agreement which modifies the existing Card Processing Agreement to extend the 2025 Notes Extension Deadline from October 21, 2024, to December 23, 2024, and the Early Maturity Date from December 31, 2024, to March 3, 2025.”

What’s next?

This extension basically buys Spirit more time to negotiate a deal and pushes off some of the deadlines a bit, but it doesn’t fix the problems for the struggling airline.

In the SEC filing, Spirit officials said the company borrowed $300 million from its revolving credit facility on October 15, which is the entire amount it had available. Those borrowings will mature on September 30, 2026.

But with that, Spirit expects to end this year with over $1.0 billion of liquidity, including unrestricted cash and cash equivalents, short-term investment securities, as well as additional liquidity.

Spirit Airlines stock had a good day, but investors should proceed with caution around this penny stock until there is an actual debt refinancing deal in place – and even then, it will have its share of headwinds.

The stock has a sell rating among most analysts with a price target of $2.00 per share. So, while it may be dirt cheap, it is not a good value right now.