Spirit Airlines Debt: Attractive Opportunity to Own Post-Reorg Equity

Parul Garg of PenderFund Capital Management presented her thesis on the debt securities of bankrupt Spirit Airlines (US: SAVEQ) at Best Ideas 2025.

Thesis summary:

Spirit Airlines is an ultra-low-cost-carrier airline operating primarily in the east and south-eastern United States, as well as Central/South America. It has recently filed for bankruptcy after merger talks with JetBlue Airlines broke down. The stock dropped 60% in one day on the news. This was due to a litany of issues hitting simultaneously, including two failed merger attempts, engine deficiencies, mounting losses, and looming debt maturities amongst a backdrop of increased competition, higher inflationary environment, and changing consumer tastes for premium-level international travel experiences.

The debt offers a significant opportunity for investors to become reorganization equity holders. With take-back paper and attractive rights offerings, holders are able to access a low valuation for a business that offers palatable leverage and room for EBITDAR growth and multiple expansion. Loyalty notes recently traded below 80 cents on the dollar, with a rights offering issued at a 30% discount to equity plan value, with potential returns in the double digits.

Convertible notes recently traded at less than 32 cents on the dollar, with a potential estimated return range of 29% to 213%. Potential positive catalysts include improved financial flexibility post-restructuring, a looser M&A regulatory environment, and the introduction of premium-class fares to generate market share growth.

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About the instructor:

Parul Garg is Pender’s stressed and distressed credit investing specialist. Since joining the Lipper award-winning Pender Corporate Bond Fund portfolio management team in 2015, Parul has quarterbacked numerous successful workouts with stressed and distressed investments. With a track record of value creation in these credits, Pender has launched the Pender Credit Opportunities Fund, with Parul leading portfolio management along with Geoff Castle.

Parul started her career as a Software Engineer for Accenture plc., from 2007-2009. Her focus area was on projects in the financial domain where she got her first exposure to capital markets. In 2009 she moved to Future First, a private investment firm in India, working as a Fixed Income Derivative Analyst. In 2013 she joined MCX Stock Exchange in India, working as a Product Developer with the Business Development Team for the Fixed Income Markets. She moved to Vancouver in 2014 to start her MBA.

Parul is a seasoned investment professional known for her meticulous evaluation and strong focus on risk mitigation. She conducts thorough assessments of company value, credit risk and liquidation value, tailoring her analysis to the unique risks of each credit investment. An advocate of objective analysis, she utilizes risk measurement systems derived from market trends and fundamental analysis. Parul prioritizes rigorous risk assessment, employing a comprehensive 13-point checklist during due diligence to deeply understand investment risks. Once an investment is secured, she actively manages the portfolio, strategically rotating holdings to optimize performance and “crystallize winners.” Her proactive approach, combined with thorough due diligence and proactive credit risk management, has led to a strong track record in the Pender Corporate Bond Fund, particularly in the stressed or distressed category.

Parul has a Bachelors of Technology in Civil Engineering from NIT Surat in India, a Masters of Business Administration from the Beedie School of Business at Simon Fraser University. In 2022 Parul attended the highly regarded Distressed Asset Investing & Corporate Restructuring program at the prestigious Wharton School, University of Pennsylvania.